Setting risk margin for claims and premium liabilities in accordance with IFRS 17

This proposal deals with the pricing and risk management considerations of a property and casualty (P&C) insurance company. These considerations are within the context of a new accounting standard called IFRS 17, in which liabilities in insurance contracts will be measured prior to and during the exposure periods. We propose an implementable and accurate methodology, which is also compliant with the new standard in generating risk measures and margin adjustments. Such a new methodology will focus on the characterisation of the distribution of losses, and will be benchmarked with the traditional collective risk model. The main objective is to see to it that contract losses are tracked down properly and the company’s income statement incorporates them legitimately; thus a more theoretically valid measurement of revenue is obtained. Case studies will be developed to demonstrate certain challenges associated with the IFRS 17 and how they could be possibly overcome in practice.

Faculty Supervisor:

Rogemar Mamon

Student:

Yixing Zhao

Partner:

J. S. Cheng & Partners Inc.

Discipline:

Statistics / Actuarial sciences

Sector:

Finance, insurance and business

University:

Western University