Sample Q14 part iii.
For each of the following lines of business, recommend an appropriate IFRS 17 measurement approach and explain your rationale:
iii. A property and casualty insurance company enters a new market and issues its first commercial automobile policies
ans - GMA, as GMA and PAA will likely lead to very different results as this a new market for the insurer
Im having trouble wrapping my mind around why a new group would likely result in different estimates between GMA and PAA. The only thing i can think of is that it is new and therefore the results will likely be volatile, if theres more to it I'd appreciate a explanation as to what other reasons PAA is not appropriate
Comments
I think personally for me, the biggest challenge is proving that the PAA estimate is close enough to the GMA one. There's a lot of uncertainty and as you mentioned volatility, given a lack of historical data so it's hard to say pass a PAA test from an audit perspective (Assumptions will be challenged). Can't think of any other immediately obvious reason off the top of my head