IFRS 17 "roll-forward", experience adjustment, assumption variance, financial changes

CanAct06CanAct06
in CIA.IFRS17

I don't know if on syllabus, but this concept is often used and heard in life insurance.

I have a few questions for longer term contracts (not 1 yr).
1) Once we calculate the IR CSM, what happens when we get end of year?

Do we 'roll-forward' to the next period and do the release via coverage units, unwinding etc?
How will actual experience/assumption changes effect the CSM?
are New Business policies added throughout the year? And the next year?

2) I thought you break groups by cohorts? If so, I guess we stop adding NB pols to group?

If you can create an excel question that goes into all these things, that will be great - but for now explain high level how all these things work.

Comments

  • Staff-T1Staff-T1

    1) When you reach year-end, you would roll-forward your CSM:

    • You would unwind a portion of the discount which increases the CSM, while reducing the CSM for service provided during the period.
    • Actual experience that differs from expectations will be released directly into the P&L
    • Any changes to future service assumptions related to these group of contracts will adjust the CSM, for example if you are changing the ELR.
    • Usually in practice, you'd group by policy year so once the year ends, new policies will be assigned to a different cohort

    I think this should be sufficient for the exam. The material doesn't go into too much detail regarding the actual calculations for the CSM when assumptions materially change so I think it is safe to say it won't be tested

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