Un-Ded formula: (A + B + C + D) - ( E + F + G + H + I)

arianeguayarianeguay
in OSFI.MCT

Hello! I believe there is a small mistake in the MCT wiki. The first instance of the formula is the following:

As you can see, the component D (Reinsurance Receivable) is removed from the deduction. As we know, it should be added based on the source text formula and the excel problems:

I was a bit confused when seeing the first formula, where we added Reinsurance Receivable and Payable together. Or maybe a misunderstood something else?
Thank you!

Comments

  • arianeguayarianeguay

    If I can add a question: in the wiki, it is stated for the B component:

    The quantity "B" represents the ceded claim amounts relating to the unexpired portion of the policy that the primary insurer expects to get back from the reinsurer

    B stands for (source text): Asset for incurred claims on reinsurance contracts held from the assuming insurer

    When reading the source text, it was in my understanding that it is related to the 'expired portion' since it is related to the incurred claims (not future claims). Can you explain how an asset for the incurred claims is related to the unexpired portion?

    Thank you for your help!

  • Staff-T1Staff-T1

    Hi, yes the correct formula is (A + B + C) - (D + E + F + G + H) or the first instance. This was a change made in 2024. We are still working on updating the attached screenshots. For your second question, you are also right and it should be the 'expired portion'. I think it is a typo - A + B should represent the total expected recoverables (Expired and Unexpired)

  • serenaliyaoserenaliyao

    before the update of 2024, the article mentioned that we need to check the LOC limit, no matter for capAV deduction or capReq margin reduction.

    Now, for CapAV deduction new formula, we do not have LOC included anymore, do we still need to check the LOC limit?

    Also, for CapReq, once we figure out the margin, do we still need to check the reduction by using (E+F+G+H+I) - (A+B+C+D) >0 statement, and check LOC limit?

  • Staff-T1Staff-T1
    edited February 6

    Err yeah I think you should come back to this in 1 - 2 days. I have redid the examples.

    Also, yes to your second question, but LOC limit should have been checked in the preceding step.

  • OnePassOnePass

    Hello, I was wondering if the final capital required for unregistered reinsurance should be 4054 only? The second comment in red font says 0 deduction.

    This is from P3 MCT excel practice.

    Thank you!

  • Staff-T1Staff-T1

    Yeap you are right! I must have fat fingered the IF formula but I have updated the formulas now

Sign In or Register to comment.