Risk Adjustment for Reinsurance Recovery
The following is discussed in CIA.IFRS17:
"risk adjustment for non-financial risk
- similar to PfADs for non-economic risk (claims development, reinsurance recovery)"
However, in CIA.IFRS17-2, they point out that the reinsurance credit risk is reflected thru a reduction in expected cash flows, not in RA. I thought reinsurance recovery and reinsurance credit risk were practically the same thing. Thoughts?
Comments
I think it shouldn't be there in the CIA-IFRS17 paper. the CIA-IFRS17 paper does not specifically mention reinsurance recovery.
In CIA IFRS17-2 it states:
Reinsurance non-performance risk is reflected through a reduction in the present value of future cash flows, not through the RA, however non-performance risk may have an “indirect” impact on the RA due to a reduction of future cash flows on which the RA is based.
Unless the above is what is meant? Thoughts @graham ?
I'll need to get back to you on this.
I think, the RI Recovery is calculated using the Reduction in CF, but then when disclosing it is a part of the Non-Financial RA (i.e. Building Block 2 from IFRS17 Measurement).
So they should not be contradicting each other!
Ok, I see. I have removed the reference to reinsurance recovery. When I wrote that, I had not yet read that other source text.
In CIA.IFRS17-1, section 3, reinsurance recovery is still under RA.
RA: Risk Adjustment (for non-financial risk)
→ claims development, reinsurance recovery
Yup @graham
A little gremlin must have snuck in during the middle of the night and changed it back.
It should be gone now. Thanks!