LRC(Excluding LC) at subsequent measurements

AndrewLAndrewL
edited August 2023 in CIA.IFRS17-LRC

  1. For the excel example 1, what would be the LRC at year 2, assuming no claims?
    My guess= 800(Opening Balance) + 0 (No premium received in year 2) - 0 (No acquisition) + 200 (amortization Acquisition) -600 (amortization Insurance Revenue)= 400

  2. If claims were incurred in the first year, how would that affect the LRC?

Comments

  • Staff-T1Staff-T1
    edited August 2023
    1. Just do LRC = UEP - DAC. So at the end of year 2 it would be 600 (UEP) - Remaining DAC(200) = 400
    2. Incurred claims does not affect the LRC, only the LIC
  • mandatory_coveragesmandatory_coverages
    edited February 6

    why are we adding premiums received but subtracting insurance revenue? What is the difference between a direct and indirect expense?

  • Staff-T1Staff-T1

    You add premiums because that is more "service that you are owing" whereas subtracting insurance revenue (earned premium) is to remove the portion of premium for which service has already been provided. If service has already been provided, it is no longer LRC but LIC.

    I'm not exactly clear as to the context with which you are considering direct vs indirect expense but generally speaking, direct expenses are those that are directly related to the policy like ALAE, claims handling, legal fees, etc. while indirect costs are stuff like staff wages, rent etc.

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