We have developed two specific tools for eligibility assessment as required by IFRS 17. There are:
- PAA Eligibility tool
- VFA Eligibility tool
PAA Eligibility tool
Premium Allocation Approach (PAA) is simplified model under IFRS 17 which can be used only in cases which are defined by Standard. The assessment if the use of PAA is allowed is called PAA eligibility assessment. It considers both qualitative and quantitative assessment.
This tool can be used for direct business (insurance and reinsurance contracts issued) as well as for reinsurance contracts held.
Tool is mainly developed for contracts with duration longer than one year, i.e. for multi-year contracts, where the eligibility assessment is necessary.
Its main purpose is to give you the information based on the assessment of the measurement of the liability for remaining coverage. In particular it tests if PAA measurement differs materially from the measurement it would be produced by general model. You just need to upload predefined input data and set several parameters and then the tool provides you with the necessary outputs.
Effects which have any impact on the PAA eligibility and which are of course included in the tool are the following:
- Revenue recognition pattern,
- Presence of significant financing component,
- Experience adjustments, and
- Assumption changes.
As it is our standard practice, we will explain you
- how the tool works,
- which data are required and
- what is the purpose of each parameter.
After that, you can assess the PAA eligibility by yourself or we can help you with it.
VFA Eligibility tool
Variable Fee Approach (VFA) is a specific measurement model which has to be used for insurance contracts with direct participation features. IFRS 17 defines three conditions which have to be met at initial recognition to decide if VFA shall be used.
Our tool provides VFA eligibility focusing on those three conditions prescribed by Standard. The first condition defined in IFRS 17 paragraph B101(a) is assessed based on qualitative input information especially about description of underlying assets and mechanism how a profit sharing is defined. The second and third conditions defined by paragraphs B101(b) and B101(c) are assessed based on required quantitative data which are results of several scenarios of projected cash flows from your actuarial software.
To be able to assess if your insurance contracts meet a definition of insurance contracts with direct participation features, we will explain you
- how the tool works,
- which data will be necessary to evaluate these three conditions and
- how to interpret obtained results like calculated ratios and their distribution.
After that, you should be able to define your required scenarios of projected cash flows based on your product features, to prepare input data, to feed the tool and to have at disposal complete information to decide if VFA shall be used or not. Of course, we can help you with it, if you want.
Apart from these IFRS17 Eligbility tools we have developed also other IFRS17 tools. Feel free too see more information about them on their pages:
- IFRS17 Cube solution - link
- IFRS17 Add-ins - link
- IFRS17 GMA proxy calculator - link
- IFRS17 PAA calculator - link
- IFRS17 PAA RI held calculator - link
- IFRS17 Transition calculators - link
- IFRS17 Illustrative models - link
We often support client also directly as consultants. For further information about our IFRS17 services, please foolow the link.
For further information about IFRS 17, see also our useful links.
If you have any questions please use the contact form below.