1. Premium Allocation Approach WS
Insurance IFRS Seminar
December 2, 2016
Bill Horbatt
Session 26

2. Case Study
You are a consultant to Maple Leaf Life, a Canadian company reporting under IFRS.
You are asked for advice on 3 situations.

3. The company sells group life in Hong Kong
Situation #1
The company sells group life in Hong Kong
50% of contracts have 1 year rate guarantees, 50% have 2 year guarantees.
The company wants to use a single method for all contracts (PAA or BBA)
What do you recommend?
Would recommendation differ if it was a US company

4. Company sells Hurricane insurance in Caribbean
Situation #2
Company sells Hurricane insurance in Caribbean
50 year history shows all claims occur in 3rd quarter (July-September)
Annual policy effective January 1
How would you earn $100 of premium by quarter under PAA?

5. Best estimate at Policy Issue
Situation #3
Premium $110
Best estimate at Policy Issue
What is opening IFRS reserve?
Premium $100
Is FASB the same?
Component
Amount
Expected Claims
$80
Acquisition Cost
$20
Risk Margin
$10
$110

6. Thank You