CAS Sample Questions-IFRS17_202406 Sample-20
Data provided is as of Dec 31, 2024. Remaining future cashflows provided are for 2023, 2024 and 2025. While calculating BoY capital in row 70, the provided pattern has been used, basically calculating target capital year ends 2023, 2024 and 2025. Then insn't discounting in row 72 bringing this capital to Jan 01, 2023 instead of Dec 31, 2023 (probably valuation date) ?
Also, the question did not specify they were looking for RA for LIC or LRC to know if we need to use both reserve and u/w risk or just reserve risk for capital required, how do we know on exam, or should we just write our assumption that it is for LRC ?
Comments
The data is provided as of Dec 31 2023. I could see the interpretation being that since we are considering the LRC for discounting here, we should start at the BoY since that is when coverage would have started.
Generally, if you state your assumption, you will be fine if you just calculate the RA specifically for LRC ( UW + reserve ) or LIC( just reserve). However, for this question specifically it does give you a hint that it is for the LRC by telling you that there are 100% remaining cash flows at the end of the year (i.e. the information is provided right before the first payment is to be made, but coverage has already started)
Thanks! But, I was looking at this from Commutation example shown in Odomorik text page 374, since these are very similar concepts, application wise at least. There the labelling starts from 2019 onwards and not 2018, the label undiscounted future payments remaining makes sense, I am thinking BoY 2019 is EoY 2018 required capital (since 100%), which is paid through out 2019 and assumed to be paid at year end 2019 so discounted to Dec 31, 2018. During the question will just make sure I am accounting for "undiscounted future payments" for capital projection in RA, however the payments assumption is provided.
Odomirok page 374 is talking about premium liabilities? Are you sure you are referring to the correct article? (Maybe I am looking at the wrong one)
Oh, I am looking at page 374/450 of pdf: "https://www.casact.org/sites/default/files/2021-03/6C_CAS_Financial_Reporting.pdf"
I see your points. However, if you circle to section 5.2 of the RA paper to the general CoC formula and take t = 1 as 2023, you will see why the formula makes sense in the sample questions.
It really depends on when you would see as the period that capital needs to be help. Does capital need to be held for 2023? That would mean this would be calculating the RA as of Jan 1 2023 which is what the writer assumed.
If capital does not need to be held for 2023, then you would start at Dec 31 2023.
Got it, Thanks!