Q19

Comments

• Staff-T1

  March 2025

  Question c can be answered using either work experience or directly using first principles:

  • If you have done PPA in Ontario, then you know it can't be used for pricing because it's prohibited
  • If you have done PPA in Alberta, then you know it can be used for non-mandatory coverages which means you should separate contracts with differing credit scores if there is indications that a group is onerous

  Using first principles:

  • Just talk generally about how difficult/easy it would be to practically create groups of contracts that would segment the book by credit score. Basically just use intuition.

  This isn't specifically covered in any part of the syllabus - You just have to use your work intuition to answer it
• Justwanta6

  August 2025

  Can you tell me if my understanding of Part b is correct?
  So the question is saying the groups of contracts are being evaluated quantitatively whether they are onerous---> is FCF >LRC ex. LC. This means that the contracts already passed the qualitative assessments and therefore the indicators we listed from part a are not sufficient to answer part b.
• Staff-T1

  August 2025

  Part (b) is not a quantitative onerous assessment. It's just asking whether you can make any conclusions on onerosity based on the given statements. Part (b) is more like concrete examples of part (a). No quantitative evaluation is being done here
• cashcrazy

  October 2025

  For part #19.(c), my understanding was that onerous contracts cannot be grouped with any other contracts (which I got from #18.(b)). How come for this example, we are grouping onerous and non-onerous contracts together?
• Staff-T1

  October 2025

  But where does it say any groups are onerous? If your logic is that lower credit scores = higher expected losses, that doesn't work cause higher expected losses does not necessarily imply onerosity