Net vs Gross & Ceded
in CIA.IFRS17
Hi Graham, for a change in reinsurance program (or retention) , the solution to an old exam problem is suggesting to use gross and net data and then derive ceded. The wiki states that it may not be appropriate to use net data as a starting point. The format of these 2 questions is different so I am trying to connect the dots and understand how to approach these differently formatted questions. Thanks!
Comments
This is a question where there is no single correct answer, especially if no data is provided and you have to answer in general terms. I can't remember which year that exam problem came from but the part you highlighted in green further down is a direct quote from a more recent reading on IFRS 17 so that's probably a better place to start.
The best way to approach a question like this is to provide a clear and reasonable explanation for your choice. The graders are looking for an understanding of the principles so if you state the principles (DC-Re) and then draw a logical conclusion based on these principles, you will get credit. You might even offer certain assumptions if not enough information is provided in the question for a definitive answer. I can't put my hands on any particular examples but I know I've seen sample answers in examiner's reports that draw opposite conclusions with both apparently receiving credit. Sometimes the final choice is just a matter of judgment, as long as you abide by the general principles.
thank you