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yeah it is the compensation fund
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Hi, For your first statement that would not be the case. The PAA method is meant to be a simplification for ease of calculation. What we are doing is simply calculating the difference between the true estimate of your liability (GMA) vs the simpl…
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Your question is quite vague but with just this information I would say that LIC at prior year end would be the total LIC for all cohorts as of the last valuation date while LIC for prior years would be LIC for all cohorts excluding current AY
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It is. They just brought up the 1.5 to the numerator
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Hi, in short it is basically because there is a phase in period to transition from PML 420 to PML 500. That being said, the phase in period is over so this question is no longer relevant. An explanation is provided in the old MCT paper but again, no…
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I'd say it's safe to assume so. The source doesn't explicitly say so.
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I would think so. I'd expect you'd need to know how to calculate the quantile of (PVFCF +RA) based on the normal/lognormal distribution. I think it's also fair game for the CAS to test on how you would calculate the actual RA. In that sense, it may …
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I'll try to see if I can take a look at a filled-up P&C annual return to determine the sign next week (hoping I remember)
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You wouldn't - Normally you'd consider the expected number of policies that you expect to write in a given cohort. Think about it, we have policies cancelling mid-term and non-renewing every day, and of course we are unable to accurately predict it …
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Just to add - whenever they say LIC it means case + IBNR. Also I believe that net means net of reinsurance but not net of Salvage and subrogation!
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Yup you are right @graham
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P1 is what we owe to the reinsurer for contracts that we are already in. Example P1: We purchase a XOL reinsurance contract with 1000 of premiums payable equally at the end of each quarter. At the end of Q1 we will have premiums payable of 750. …
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Just to add here you don't actually have to write the formula to obtain full marks! But writing our general formulas will give you credit if you make a calculation error or linked to the wrong cell
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Absolutely. I am pretty sure the LRC, ISE and ISR calculations will appear on the exams for this sitting
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why would they not be applicable right now?
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Yes you are right tshute -> I think bulubala got the orders mixed around but the logic is right
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Off the top of my head, probably some expenses related to mid term cancellations? Not 100% sure tbh
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No, refer to section 4.8 in the source where they specifically mention that LRC = FCF when there is a LC
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The CSM is set at the amount such that there is no profit or loss at initial recognition. If your PVFCF = -500, then your CSM is set to 500. At time 0, LRC = FCF + CSM = 0
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This is because of the way the CSM is defined to be exactly opposite of the FCF right at time 0. See the above example
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No problem
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Renewal business would be on a different cohort and is outside the contract boundary of your current cohort. I believe costs associated with renewal business is an acquisition cost
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I'd refer to this discussion here for your first question https://battleactsmain.ca/vanillaforum/discussion/943/loss-component-under-paa#latest Your formula is not correct - It is PAA = UEP (Prem Received - EP) - DAC This formula is how you'd c…
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Both the LC and the CSM are a negative liability. Example: Cash Inflow: 100 Cash outflow: 200 Loss component = 100 Let's assume there is only one payment for both the inflow and outflow that is settled at time 1. With a LC on the balance she…
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As I mentioned in my initial response, you need to add OCI and not AOCI. OCI(x) = AOCI(x) - AOCI(x-1)
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1) your contract can switch from being onerous to being profitable -> This represents a reversal of losses 2) Yes, exactly. There won't be any CSM on onerous contracts and therefore any changes in the underlying contract will not affect the CSM.…
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This is actually a typo on the examiner's solution. If you look at the row, it actually says OCI for the year and NOT AOCI. In the calculation however, they just take the row as is which is correct
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In scenario 1, you have that outflows > inflows. You then have a negative CSM which defers the recognition of losses. In scenario 2, you have inflows > outflows. You then have a positive CSM which defers the recognition of profit. CSM being …
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No it is not. The purpose of the CSM is to defer the recognition of profit. The Loss component amount will be recognized immediately in P&L
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1) Yes that is correct 2) Insurance acquisition costs should be past of internal cost. It will be part of the FCF as long as it is directly attributable to the contract. A portion of the insurance acquisition cash flows would be considered in the e…