Why estimate using PAA?

suomisuomi
in CIA.IFRS17-PAA

When assessing whether a group of policies is eligible for PAA in the calculation of LRC, I understand Threshold 1 & 2, but would it even be necessary to figure out threshold 3? Because threshold 3 requires calculating the LRC using GMA, so why not just value the LRC using GMA at that point, it doesn't make sense to use PAA if you've already calculated GMA. Any thoughts on this?

Comments

  • grahamgraham

    That's exactly what I thought myself. It seems completely dumb to require you to calculate LRC using GMA just to test PAA eligibility.

    I think a possible explanation is that if you calculate GMA for one group of business and it's close to PAA, then you can assume it would be close for similar groups of business without having to do the calculation.

    Also, if you do the calculation for year-end and GMA is close to PAA, then you can maybe assume they will still be close at the end of the first quarter of the following year and just use PAA for your first quarter analysis.

    None of that is discussed in the source text, but that's how I made sense of it.

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