do you mind pointing to the formula used? The solution is using a different formula to calculate the countrywide PML. For 420 they took the max but not for 500 years. I couldn't find anything in the OSFI paper
That exam question is out-of-date. It was covered in the pre-IFRS17 version of the MCT reading. The phase-in period was from 2014-2022 and now that we are in 2023, the phase-in period is no longer relevant. You can see which exam problems are outdated using from the BattleCards:
And you can get a BattelCard-style list of every old exam using this link:
My understanding is that we can now use country-wide PML500 as ERX in model approach (there is no given info of PTIV and deductible so standard approach cannot be used). Then
ERC = 989.77 ER = 1,237.21
Comments
It's in the OSFI paper under Earthquake risk
do you mind pointing to the formula used? The solution is using a different formula to calculate the countrywide PML. For 420 they took the max but not for 500 years. I couldn't find anything in the OSFI paper
That exam question is out-of-date. It was covered in the pre-IFRS17 version of the MCT reading. The phase-in period was from 2014-2022 and now that we are in 2023, the phase-in period is no longer relevant. You can see which exam problems are outdated using from the BattleCards:
And you can get a BattelCard-style list of every old exam using this link:
And the above link appears here on the Main Page: (2nd link down)
My understanding is that we can now use country-wide PML500 as ERX in model approach (there is no given info of PTIV and deductible so standard approach cannot be used). Then
ERC = 989.77
ER = 1,237.21
Is my understanding correct?
Yes, your understanding is correct!
Going to write out the math for anyone reading this.
ER = (EPR + ERC) * 1.25
Where: EPR = 0 in this question, and ERC = ERX - FR
Thus ERC = 1,289.77 - 3000 * 0.1 = 989.77
ER = (989.77 + 0) * 1.25 = 1,237.213