CIA.IFRS17.PAA

Question 1

Describe the carrying amount for IRC using PAA (Calculated at initial recognition)

Answer 1

• Premiums received (at initial recognition)
• Minus acquisition cash flows at that date (unless already expensed)
• Plus any assets for acquisition cash flows derecognized minus liabilities previously recognized

Question 2

Identify differences between GMA and PAA for calculating LRC

Answer 2

• PAA is simpler
• PAA doesn’t require estimation of FCFs (Fulfillment Cash Flows)
• PAA doesn’t require a CSM (Contractual Service Margin)

Question 3

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

Answer 3

No, this disqualifies use of PAA

Question 4

How can you determine if LRC using PAA differs materially from LRC using GMA

Answer 4

Quantitative assessment:
- calculate LRC using PAA & GMA and verify the difference is <= materiality threshold
Qualitative assessment:
- assess a similar group of contracts

Question 5

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

Answer 5

• must add a “loss component”
• loss component = (LRC using GMA) - (LRC using PAA)

Question 6

Review Appendix A