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Wix:Training/IFRS17/The general model: subsequent measurement/quiz: Difference between revisions

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Created page with "{{Quiz/start}} {{Quiz | topic = Passage of time: unwinding discount, releasing RA, releasing CSM | question = AXA insures a group of property contracts covering 3,000 apartments in the coastal city of Nantes, France. At the start of 2026, the group's fulfilment cash flows have a present value of €10 million, discounted at 3%. One year passes with no change in assumptions. What happens to the liability solely due to the passage of time? | option_a..."
 
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{{Quiz
| topic = Passage of time: unwinding discount, releasing RA, releasing CSM
| question = AXA insuresissues a group of property contracts covering 3,000 apartmentsten-year indisability theincome coastalcontracts cityto employees of Nantesseveral large employers in Lyon, France. At the start of 2026, the group's fulfilment cash flows have a present value of €10 million, discounted at 3%. One year passes with no change in assumptions and no claims. What happens to the liability solely due to the passage of time?
| option_a = It decreases by €300,000 because the remaining coverage period is shorter.
| option_b = It increases by approximately €300,000 due to the unwinding of the discount.
| option_c = It stays the same because no claims have occurred.
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{{Quiz
| topic = Passage of time: unwinding discount, releasing RA, releasing CSM
| question = For the same NantesLyon propertydisability group, the risk adjustment at the start of 2026 was €600,000. During the year, a portion of risk is borne without adverse experience. Where does the released portion of the risk adjustment appear?
| option_a = Insurance finance income or expense.
| option_b = It reduces the contractual service margin.
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{{Quiz
| topic = Passage of time: unwinding discount, releasing RA, releasing CSM
| question = The NantesLyon propertydisability group has a CSM of €2 million at the start of 2026 and provides roughly equal coverage over fourits eight remaining years. Approximately how much CSM is released into insurance revenue for 2026?
| option_a = €2 million, because the insurer has earned all its profit by surviving the year.
| option_b = €500€250,000, based on the coverage units for one of foureight remaining years.
| option_c = Nothing, because the CSM is only released when claims are paid.
| option_d = €250€125,000, because only half the risk adjustment has been released.
| correct_answer = b
| explanation = The CSM is released using coverage units. With foureight years of equal coverage remaining, one-quartereighth of the €2 million CSM (€500€250,000) is released in 2026. The CSM is not linked to claim payments (option c) nor to the risk adjustment release (option d).
}}
 
{{Quiz
| topic = Passage of time: unwinding discount, releasing RA, releasing CSM
| question = A new analyst in the NantesLyon office classifies the €300,000 discount unwinding as part of insurance revenue when preparing the quarterly report. Is this correct?
| option_a = Yes, because all changes in the liability are part of insurance revenue.
| option_b = No, the unwinding of the discount is a financing effect and belongs in insurance finance income or expense.
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{{Quiz
| topic = Changes in estimates: future service adjusts CSM, current/past service hits P&L
| question = In mid-2026, newupdated weatherepidemiological data forsuggests that long-term disability incidence rates among the Nantesinsured coastworkforce suggestsin milderLyon wintersare aheadtrending lower than originally assumed. AXA's actuaries reduce the expected future claimsdisability benefit payments for the property group by €400,000. The change relates entirely to coverage not yet provided. How is this favourable change treated?
| option_a = It is recognised immediately as a profit in the income statement.
| option_b = It increases the CSM by €400,000, to be released over remaining coverage periods.
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{{Quiz
| topic = Changes in estimates: future service adjusts CSM, current/past service hits P&L
| question = NowLater supposein the2026, oppositea scenario:new anoccupational unusuallyillness severelinked autumnto storma seasonchemical causesexposure theat actuariesa tomajor Lyon employer sharply increases projected long-term disability claims. The actuaries increaseraise expected future claims by €2.86 million. The CSM for the group currently stands at €2.42 million (after the earlier adjustments). What happens?
| option_a = The CSM decreases to zero, and the remaining €400,000 is recognised as a loss in profit or loss.
| option_b = The CSM decreases to negative €400,000, to be recovered later.
| option_c = The entire €2.86 million is recognised as insurance service expense immediately.
| option_d = The CSM absorbs the full €2.86 million because the change relates to future service.
| correct_answer = a
| explanation = The CSM absorbs unfavourable changes relating to future service, but it cannot go below zero. The CSM absorbs €2.42 million, and the remaining €400,000 that would push it negative is recognised immediately as a loss. The group becomes onerous at that point. Option (d) is wrong because the CSM has insufficient capacity to absorb the full amount.
}}
 
{{Quiz
| topic = Changes in estimates: future service adjusts CSM, current/past service hits P&L
| question = During the same autumn stormsSeparately, a45 batchmembers of 150the claimsLyon isgroup incurredare inalready Nantesreceiving fromdisability damagepayments thatwhen, hasin alreadylate occurred.2026, Aupdated monthmedical later,assessments raise the estimated cost of thesetheir incurredongoing claims is revised upwardbenefits by €200,000 due to higher repair costs. Where does this €200,000 adjustment land?
| option_a = It adjusts the CSM because it changes the insurer's fulfilment cash flows.
| option_b = It is deferred until the claimsbenefit payments are actually settledmade.
| option_c = It goes directly to insurance service expenses in the income statement as a cost ofrelating to past or current service.
| option_d = It reduces insurance revenue in the current period.
| correct_answer = c
| explanation = The claimsdisabilities have already been incurredoccurred, meaning the service (being on risk duringwhen the stormdisabilities were incurred) has been provided. Re-estimates of incurred claims relate to past service and bypass the CSM, flowing directly to insurance service expenses. Only changes relating to future service can adjust the CSM.
}}
 
{{Quiz
| topic = Claims incurred, settled, and derecognition
| question = OfAt the 150December 2026 reporting date, stormAXA's claims inteam Nantes,knows 30from homeownershistorical havepatterns notthat yetroughly reported20 theiradditional damagemembers byof the DecemberLyon 2026group reportingare datelikely disabled but have not yet filed claims. Should these unreported claimsdisabilities be reflected in the financial statements?
| option_a = No, because the insurer cannot recognise what has not been reported.
| option_b = Yes, the insurer must estimate incurred but not yet reported (IBNR) claims using actuarial methods and include them in the liability.
| option_c = Only if the homeownersmembers file before the financial statements are published.
| option_d = They are included only if the insurer has received informal notice of the damagedisability.
| correct_answer = b
| explanation = Under IFRS 17, the liability must reflect all claims that have been incurred, regardless of whether they have been reported. The insurer uses actuarial techniques to estimate IBNR claims each reporting period. Waiting for formal notification (options a, c, and d) would understate the liability and mislead users of the financial statements.
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{{Quiz
| topic = Claims incurred, settled, and derecognition
| question = In early 2027, AXAone settlesmember aof Nantesthe stormLyon claimgroup forwho €15,000had whenbeen thereceiving previousdisability estimatebenefits returns to work earlier than expected. The remaining benefit reserve for this member was €15,000, but only €13,500 was ultimately paid. How is the €1,500 difference treated?
| option_a = It adjusts the CSM because it changes fulfilment cash flows.
| option_b = It is recognised as insurance finance expenseincome.
| option_c = It is recognised as ana favourable adjustment to insurance service expenses in the current period, since it relates to past service.
| option_d = It is carried forward and netted against future favourableunfavourable claim settlements.
| correct_answer = c
| explanation = The claim relates to ana eventdisability that has already occurred (past service), so the difference between the estimate and the actual paymentpayments goes directly to insurance service expenses as a favourable variance. The CSM is not involved because there is no future service to adjust. Netting against future settlements (option d) is not permitted under IFRS 17.
}}
 
{{Quiz
| topic = Claims incurred, settled, and derecognition
| question = By mid-20302036, all claimscontracts fromin the NantesLyon propertydisability group have been settledexpired and theall coveragebenefit periodpayments hashave endedbeen completed. A small residual balance of €18,000 remains in the fulfilment cash flows due to a final estimation adjustment. What should the insurer do?
| option_a = Keep the contract group on the balance sheet until the next reporting cycle in case late claims emerge.
| option_b = Transfer the residual balance to the CSM of a new contract group.
| option_c = Derecognise the contract group, releasing anythe remaining balance to the income statement.
| option_d = Reclassify the residual balance as a provision under IAS 37.
| correct_answer = c
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