2013 Past Exam Question
Should part a) be outdated? I just read the source paper and the question is almost taken right from the example in the paper...do we need to know how to do this calculation on the exam?
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Should part a) be outdated? I just read the source paper and the question is almost taken right from the example in the paper...do we need to know how to do this calculation on the exam?
Comments
The definition of excess (deficiency) ratio changed when IFRS 17 was introduced and the calculations given in the CIA.Runoff source text are not consistent with the new CCIR instructions. That's why I marked it as outdated.
(This reading should have been removed, or at least updated, when IFRS 17 became effective.)
Okay, so are you saying we should essentially ignore the Runoff paper and calculate excess (deficiency) as follows (?):
Excess (deficiency) = undiscounted liabilities at prior year end - net amount paid during year - undiscounted liabilities. at current year-end
Yes, that's correct. Here's the reference in the CCIR.Instructions wiki article:
If I were studying this reading, I would memorize the answers to these exam questions:
As to whether you should otherwise ignore the rest of it, I can't say for sure because the CAS still has it on the syllabus even though it contains outdated information. In any case however, I wouldn't spend much time on it because even before it became outdated, it was not asked very often.
Alright, thank you for the thorough explanation!
Technically under pre-IFRS17 practice the discount rate on liabilities was tied much more closely to the assets held by the company and thus the investment income. Under IFRS 17 now that the reference portfolio of assets has no direct connection to the assets held by the company is it possible that the two methods mentioned are no longer equivalent?
In other words investment yield on assets supporting liabilities may be a poor proxy for discount rate.
Yes that is right