April 2025 exam [2 (iv)]

[gasan.sulaiman]

The solution says theres no imact on assets if the admin outsourcer default.
Do assets not decrease if higher new business initial expense and paying annuities for longer?
Do assets not decrease (short to medium term) as company has to pay for expense of finding a new outsourcer and putting a temporary measure in please?

Is my understanding incorrest because we are not being asked for the impact on year assets/liabilities/sovency ratio, but on the projected position.

 

[Lindsay Smitherman]

These higher costs will all be incurred in the future, so they impact liabilities (higher expected future expenses). There is no immediate impact on the value of assets.

 

[1495_sc]

The question also mentions that outsourcer default is followed by "higher internal expenses for non-outsourced functions". Why would this not affect assets?

 

[Em Francis]

These higher internal expenses are in the future and so will impact liabilities.