The Committee on Property and Casualty Insurance Financial Reporting (PCFRC) has prepared this educational note to provide guidance on various actuarial considerations related to the liability for remaining coverage (LRC) in P&C insurance contracts, in accordance with IFRS 17 requirements. Specific considerations relating to P&C reinsurance contracts are also included. This educational note may also be of interest to life insurance practitioners.
This educational note is structured in sections as follows:
• Sections 1 and 2, respectively, provide an introduction and a definition of the terminology used in this educational note.
• Section 3 provides guidance related to the level of aggregation and financial statement presentation.
• Section 4 provides guidance related to the LRC measured under the general measurement approach (GMA).
• Section 5 provides guidance related to the LRC measured under the premium allocation approach (PAA).
• Section 6 summarizes key considerations for reinsurance contracts issued and held, including the calculation of the loss-recovery component when underlying contracts are onerous.
• Section 7 provides commentary on an illustrative example, provided in an Excel file under separate cover, of the calculation of the loss component.
• Section 8 provides guidance on considerations for determining the expected loss ratio (ELR) to be used in the minimum capital test (MCT) insurance risk calculation.