CIA.IFRS17-1 Flashcards

1
Q

What is the condition for an insurance contract to be onerous at initial recognition?

A

A contract is onerous at initial recognition if there is a net outflow for the sum of:
- FCFs
- acquisition cash flows
- cash flows arising from the contract at the date of initial recognition

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2
Q

How shall en entity, at minimum, divide a portfolio into groups (3)

A

(a) a group that is onerous at initial recognition
(b) a group that has no significant possibility of becoming onerous
(c) a group of any remaining contracts

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3
Q

Identify considerations when estimating the risk on non-performance of a reinsurer (3)

A
  • financial strength of the reinsurer
  • history of claims and coverage disputes with reinsurer
  • risk of contagion across various reinsurance arrangements
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4
Q

Identify 3 options for grouping data when estimating the present value of future cash flows and the RA

A
  • estimate gross & net losses then calculate the ceded as gross - net
  • estimate gross & ceded losses then calculate the net as gross - ceded
  • estimate net & ceded losses then calculate the gross as net + ceded
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5
Q

Briefly describe the role of actuarial input when estimating the RA (4)

A
  • assist in assessing risk aversion of entity
  • assist in evaluating variability inherent in the insurance contracts
  • assist in assessing compensation for bearing risk
  • provide explanations of the process to management so they may execute their oversight role
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6
Q

How might insurance revenue for reinsurance contracts issued differ from earned premium (3)

A
  • seasonality adjustments that are reflected if the expected pattern of release of risk differ from the passage of time
  • reinstatement premiums collected following an insured event are generally applied against insurance service expense
  • some ceding commission expenses on proportional reinsurance treaties might be included as part of insurance revenue, insurance service expense or the investment component
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7
Q

How is the CSM concept different for reinsurance contracts held

A

unlike the CSM for underlying insurance contracts, the CSM on reinsurance held can be positive or negative

there is no unearned profit, instead there is a net cost or net gain on purchasing reinsurance

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8
Q

When does an entity should recognize a group of insurance contracts

A

the earliest of the following:
(a) the beginning of the coverage period of the group
(b) the date when the first payment from a policyholder in the group becomes due
(c) for a group of onerous contracts, when the group becomes onerous

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9
Q

Briefly contrast the accounting treatment of the LC in the statement of financial position vs the statement of financial performance

A

in the statement of financial position:
→ LC is booked as part of LRC

in the statement of financial performance:
→ LC is recognized as insurance service expense

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10
Q

Identify situations under PAA method for reclassifying a group from non-onerous to onerous at subsequent measurement (5)

A
  • judicial or legal findings (landmark court cases)
  • changes in the regulatory environment
  • shifts in the economic environment (trends, interest rates)
  • allocation of expenses
  • changes in the RA
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11
Q

Briefly describe the accounting treatment of Facility Association’s mechanisms

A

FARM & UAF:
- member companies account for their share of FARM & UAF insurance contracts as direct business
RSPs:
- member companies use reinsurance accounting where the reinsurer is the collective FA membership

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