Question 10

mandatory_coveragesmandatory_coverages
in CAS Sample IFRS 17 Questions

BA commentary - "When calculating the net expenses from reinsurance held, the allocation of reinsurance premiums should be negative. I think this is a typo here"

So should net exp from reins held be = -10000+2500+20000?

Comments

  • Staff-T1Staff-T1

    Yes

  • CanAct06CanAct06

    Thanks, but can you correct the sol'n to show this also (unless you have already)

  • Staff-T1Staff-T1

    I don't correct the CAS solution directly as this could cause a lot of confusion (I like to keep the CAS answers clean as they are) and just provide commentary down below. I find this makes it easier also for me to port comments over when the CAS updates the sample questions, which they do quite frequently

  • kybazzikybazzi

    I want to understand "Effect of changes in non-performance risk".

    Since "Net expenses from reinsurance contracts held" is added to ISR, its components should be (+) added if they increase ISR, (-) if they decrease ISR. Hence:

    • Allocation of reinsurance premiums: since paid to reinsurer, it (-) decreases ISR
    • Amounts recoverable: since recovered, it (+) increases ISR
    • Effect of changes in non-performance risk of reinsurers: this one I don't understand

    What does it mean? How do we make sure we are conceptualizing it correctly to know whether it is (+) added or (-) subtracted above? For example, if its value is "2500", why can't I interpret that as meaning there is an additional effect of 2500 needed to account for non-performance risk (in which case, it should lower ISR and hence be (-) subtracted above).

    Thank you.

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