New "net investment income from insurance operation"

FrancoisFrancois
in CCIR.ARinstr

Hi,

With this new version of the paper, there is a new element to the calculation; the Share of Net Income from Pooled Funds.

I won't write the whole formula, because it would just take time and not add value, but my question is

Which one is the new version :

The lesser of [X, Y] + Share of net Income ...

or

The lesser of [X, Y + Share of net Income...]

I assume it is the first one, since it makes way more sense to me, but I just want to be sure.

Thanks again

Comments

  • javidjavid

    This is a good question. It is not fully clear from the way they write it. However, I believe that it's actually the second one min(X, Y + Share of net income...) for the following reason:

    1. Share of net income ... = (page 20.30, line 47)
    2. If you look at the ingredients in the calculation of X, they reference (line 46) which is the investment yield. (line 46) now incorporates Share of net income ... in its calculation. Therefore, when we calculate X as the product of (A+B+C+D-E-F) and (line 46), we will be accounting for the Share of net income ... in some manner.
    3. Therefore, to prevent double counting, we should do min(X, Y + Share of net income...) (had we done min(X, Y) + Share of net income..., then we may be double counting the Share of net income... portion).

    Referencing http://www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/ic-sa/pc-sam/Pages/pcVI.aspx here so you can do Ctrl+F to move quickly to the lines mentioned above.

  • FrancoisFrancois

    This makes sense to me, thanks a lot.

    Considering that the MSA text is not updated, I doubt this will end up on the exam, but I wanted to be sure.

    MSA text for adjusted Investment yield does not have the Share of pool funds component.

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