risk of non-performance

NycxBattleNycxBattle
edited March 2024 in CIA.IFRS17-1

What exactly is risk of non-performance?

Can you give an example?

Since non-performance risk is a non financial risk, shouldn't that be part of the RA (for non financial), how come its part of the cashflow? Shouldn't this affect the CSM?

I don't fully understand non-performance risk so my question may not make sense.

Comments

  • Staff-T1Staff-T1

    Non-performance risk is a financial risk since it deals with credit risk and is basically the risk that the reinsurer will default and not fulfill obligations to the primary insurer. It is clearly stated in the source that it is not part of the RA.

  • cornedovcornedov

    Is non-performance risk part of LIC/LRC or is it part of AIC/ARC? I assume if it was part of LIC it would increase LIC where as if it was part of AIC it would reduce AIC.

  • Staff-T1Staff-T1

    There's no such thing as a risk of non-performance for the LIC/LRC since its a liability and not an asset so there would be no credit risk. It's part of the AIC/ARC and reduces it.

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