This is part of IFRS accounts. (1) If the company reserves properly does it still need to perform it? (2) What is the basis of the test? Is it best estimate? Is discounting allowed?
Hi, You might find this link helpful: http://www.actuaries.org/STANDARDS/Current/IASP6_EN.pdf#14 It describes the calculation of the current estimates of future cashflows as being net of DAC and on a best estimate basis (see section 4.1.7). This best estimate relates to the probability weighted average of all possible outcomes, but with a realistic adjustment for risk and uncertainty where necessary, ie it is likely to be slightly on the cautious side. Amounts would be discounted. Coralie
thanks! My understanding is that the chain-ladder reserving method meets the minimum requirements of a LAT test (for claims reserves), since it is in essence a probability weighted cashflow method. Is that correct?
