CIA.IFRS17-PAA

Question 1

Is a group PAA eligible if an insurer expects significant variability in the FCFs?

Answer 1

No, this disqualifies use of PAA

Question 2

Identify 2 ways to determine if LRC using PAA differs materially from LRC using GMA.

Answer 2

1. Quantitative assessment:
   • calculate LRC using PAA & GMA and verify the difference is ≤ materiality threshold
2. Qualitative assessment:
   • assess a similar group of contracts

Question 3

If a group of onerous contracts is PAA eligible, what further adjustment to LRC is required?

Answer 3

• must add a “loss component”

* loss component = (LRC using GMA) – (LRC using PAA)

Question 4

Briefly explain the application of the thresholds.

Answer 4

1. Cov Period smaller or equal to 12m?
   -> If satisfied => automatically eligible for PAA
   -> If not satisfied => apply threshold #2
2. Group revenue smaller or equal to 1% of total revenue?
   -> If satisfied => eligible for PAA
   -> If not satisfied => apply threshold #3
3. (PAA - GMA) smaller or equal to group’s share of aggregate threshold
   Group’s share = (Group revenue * Group LR)/Total * Aggregate Threshold
   -> If satisfied => We can assume PAA & GMA do not materially differ and group is eligible for PAA
   -> If not satisfied => not eligible for PAA