CIA.Valn

Question 1

how should an actuary incorporate inflation assumptions in reserve analysis?

Answer 1

• consult with underwriters/ business analysts/ fraud detection experts/ claim adjusters to understand whether inflation has transpired in claims payments and is accounted for in case reserves
• consult CPI
• perform sensitivity analysis with varying inflation assumptions to assess the sensitivity of reserve estimates

Question 2

why may the development method not work with long tailed lines with sudden changes in inflation

Answer 2

the effect of inflation on recent development period may emerge more quickly for short tailed lines, but more slowly for long tailed lines

Question 3

what is the ongoing role of actuaries concerning COVID19?

Answer 3

• follow guidance from regulatory bodies like OSFI
• monitor legal actions related to covid19 that might impact valuations

Question 4

what specific requirement does OSFI have for insurance companies related to covid19?

Answer 4

report statistics and impacts in AAR

Question 5

how are actuaries approaching the evaluation of trends and metrics affected by covid19?

Answer 5

take a longer term view to cover pre and post pandemic impacts

Question 6

what specific factors are easier to isolate concerning covid19 impact on policy liabilities?

Answer 6

• premium reductions
• refunds
• cost of material and labour

Question 7

how will IFRS17 affect the valuation of actuarial liabilities?

Answer 7

1) Discounting
- use a yield curve instead of a single discount rate
- risk adjustment for financial risk implicitly included in the yield curve instead of PfAD
2) Risk adjustment
- adjust PV(future CFs) for uncertainty in amount and timing related to non-financial risk
3) Aggregation
- create portfolios of similar risks that are managed together: onerous risks, non-onerous risks, remaining risks
4) Measurement
- may use PAA for measuring remaining liabilities
- PAA is a simplified version of BAA and can be used under certain conditions
5) Reporting
- carrying amounts for 4 groups must be shown separately in financial statements:
- insurance contracts that are assets/liabilities
- reinsurance contracts that are assets/liabilities

Question 8

define “yield curve”

Answer 8

a yield curve is a function relating yield of fixed interest securities to the length of time to maturity