IFRS - PAA

Question 1

describe the carrying amount for LRC using PAA at initial recognition

Answer 1

= premiums received at initial recognition
- acquisition cash flows at that date (unless already expensed)
+ any assets for acquisition cash flows derecognized
- liabilities previously recognized

Question 2

identify differences between GMA and PAA for calculating LRC

Answer 2

• PAA is simpler
• PAA does not require estimation of FCF
• PAA does not require CSM

Question 3

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

Answer 3

no

Question 4

what are some factors that could influence the contract boundary and length of the coverage period?

Answer 4

• some contracts may allow both parties to unilaterally terminate the contract within 12 months
• some short term contracts may provide consequential insurance coverage that might extend the coverage period
• contracts that have multiple coverages with different contract boundaries

Question 5

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

Answer 5

• quantitative assessment: calculate LRC using PAA & GMA and verify the difference is smaller than materiality threshold
• qualitative assessment: assess a similar group of contracts

Question 6

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

Answer 6

LRC based on PAA is increased to reflect a loss component
PAA estimate = GMA estimate for an onerous group by definition

Question 7

app A