Instructions for Unpaid Claims & Loss Ratio Analysis Exhibit for Property & Casualty and Mortgage Insurers
Information
Table of contents
We expect each property & casualty and mortgage insurer to submit the unpaid claims and loss ratio analysis exhibit (UCLRE) in addition to their appointed actuary’s report (AAR) and supplementary tables.
Instructions for the completion of the UCLRE are provided below.
General instructions
Prepare the UCLRE in accordance with the following instructions:
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Submit the electronic filing of the UCLRE via the Regulatory Reporting System no later than 60 days after the end of the company’s fiscal year.
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Enter all amounts in thousands of Canadian dollars.
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Enter liabilities for incurred claims as positive numbers in the gross exhibits. Enter assets for incurred claims as positive numbers in the total ceded exhibit.
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Complete one table for each actuarial line of business on a gross basis, a table for all lines of business combined on a gross basis (tab “Exhibit – Total – Gross”), and a table for all reinsurance ceded (tab “Exhibit – Total – Ceded”).
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The appointed actuary (AA) may choose not to complete an individual page for lines of business that the AA does not review. If the AA omits certain lines of business, enter total fulfilment cash flows for those lines of business as other provisions (line 15) of the total gross business table (tab “Exhibit – Total – Gross”).
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Complete the UCLRE on a consistent basis (accident year or underwriting year) for all exhibits. Select accident year if the company completes exhibits on a report year basis and underwriting year otherwise.
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References to column numbers and line numbers (for example, column (01) or line (09)) reference column and line numbers in the table. The column and line numbers do not reference worksheet rows and columns.
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Enter the exhibit category code, actuary’s category code, aggregation type code, portfolio, and liquidity category for discount rate without leaving any blanks. Refer to the definitions of the exhibit category code, actuary’s category code, aggregation type code, portfolio, and liquidity category in “PC5 Business and Data Definitions.xlsx” file on the same web page of this document.
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Enter industry pools or inter-company reinsurance adjustments to the gross basis in lines 14 and 15 of tab “Exhibit – Total – Gross”.
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Complete columns (03), (13), (16), (19), (21) and (22) for the past ten accident or underwriting years. Complete columns (02), (04) through (07), (12), (18), (20), (23) and (24) for all accident or underwriting years.
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The amounts entered in lines 01 to 12 of the tables should exclude all paid and unpaid unallocated loss adjustment expenses (ULAE), costs and recoveries related to facility association and plan and other provisions.
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We expect that amounts and presentation (for example, actuarial lines of business) are consistent between the AAR and the UCLRE.
We may ask insurers to refile the UCLRE to correct errors including the failure to follow these instructions.
Send questions regarding the UCLRE and its completion to AARinquiryPC@osfi-bsif.gc.ca.
The following sections provide specific guidance on aspects of the UCLRE.
Actuarial lines of business
Complete a table for each actuarial line of business.
Each actuarial line of business should be uniquely linked to a single line of business reported in the annual return. The actuarial line of business selected should match the “exhibit category code” definition outlined in the “PC5 Business and Data Definitions.xlsx” file.
If an actuarial line of business is a combination of two or more annual return lines, choose the annual return line that best represents the operations of the entity.
Report proportional and non-proportional business separately for reinsurers.
If insurance revenue is not available in the same detail as the claims, estimate a split of insurance revenue or combine the data showing it in the annual return line that best represents the line of business underwritten by the entity.
Exhibit Category Code
Do not alter the code pre-entered in tab Exhibit – Total – Gross and tab Exhibit – Total – Ceded.
Actuary’s Category Code
Do not alter the code pre-entered in tab Exhibit – Total – Gross and tab Exhibit – Total – Ceded.
Aggregation Type Code
Choose the basis that is most suited to the entity’s operation.
Portfolio
Enter a code (without blanks) representing the IFRS 17 portfolio to which the actuarial line of business applies.
Do not alter the code pre-entered in tab Exhibit – Total – Gross and tab Exhibit – Total – Ceded.
Liquidity Category Code for Discount Rate
Enter a code (without blanks) representing the IFRS 17 liquidity category applying to the liabilities for incurred claims (LIC) for the actuarial line of business.
Do not alter the code pre-entered in tab Exhibit – Total – Gross and tab Exhibit – Total – Ceded.
Colum (01) – Accident Year or Underwriting Year
Enter the accident year or underwriting year in column 01 from oldest to most recent. Line 01 includes figures from accident or underwriting years more than ten years ago (where applicable), line 02 includes figures from ten years ago, and so on.
Colum (02) – Paid Losses - Current Year
Paid losses should include paid claims and paid (allocated) adjustment expenses.
Column (03) – Paid Losses - Cumulative
Paid losses should include paid claims and paid (allocated) adjustment expenses.
Column (04) – Estimate of Future Cash Flows - Case Reserves
Case reserves should include provision for unpaid claims and allocated adjustment expenses. Case reserves should be undiscounted or discounted consistent with their measurement in the LIC.
Column (05) – Estimate of Future Cash Flows - IBNR
The IBNR consists of the provision for incurred but not reported claims and allocated adjustment expenses as well as any adjustment for deficiency or redundancy of the case reserves (column (04)). IBNR should be undiscounted except to the extent that undiscounted values are not available.
Column (06) – Estimate of Future Cash Flows - Total
This is the total of columns 04 (case reserves) and 05 (IBNR).
Column (07) – Estimate of Present Value of Future Cash Flows - Total
The present value of future cash flows is the discounted value of case reserves and IBNR (total future cash flows presented in column (06)). The present value should not include risk adjustment.
The present value of future cash flows should correspond to those reported in the AAR.
The AA should provide an explanation where the present value of future cash flows is greater than the total estimated future cash flows (column (06)).
Column (12) – Fulfillment Cash Flows
Fulfillment cash flows are the sum of present value of future cash flows (column (07)) and risk adjustment (column (23)).
Column (13) – Insurance Revenue/Earned Premiums
Enter insurance revenue or earned premium by accident or underwriting year. Insurers should report earned premiums (or cumulative earned premiums to date) for accident or underwriting years prior to the effective date of IFRS 17. The use of insurance revenue or earned premium should be disclosed.
Insurers should report and develop insurance revenue or earned premiums at ultimate where development is possible (for example, where insurers use experience rating).
Insurance revenue or earned premiums may be allocated where those amounts are not available in the same detail as the claims.
Column (16) – Undiscounted Loss Ratio
The undiscounted loss ratio equals (a) the sum of cumulative paid losses (column (03)) and undiscounted estimated future cash flows (column (06)) divided by (b) insurance revenue or earned premiums (column (13)). The loss ratio should be expressed as a percentage rather than a decimal.
Column (18) – Claim Counts - Open as at Year-End
Open claim counts for an accident or underwriting year refer to the number of unsettled claims or claims on which insurers are still making payments from that year as at the current year-end.
Leave this column blank (that is, do not enter zero or any other information) if the company cannot obtain claim count information (for example, reinsurers and assumed business).
We expect claim counts reported in the UCLRE to be consistent with the way the AA defines and records claim counts in the AAR.
Column (19) – Claim Counts – Reported to Date
Reported claim counts to date for an accident or underwriting year refer to cumulative reported claim counts as at the current year-end.
The column should be left blank (that is, nothing should be entered) if it is difficult to obtain claim count information (for example, reinsurers and assumed business).
Column (20) – Total Estimate of Future Cash Flows – As at Prior Year-End
Enter the undiscounted estimate of future cash flows from the prior year (equivalent to column (06)).
Amounts from the prior year should be allocated where there have been changes in the actuarial lines of business or the reinsurance/retrocession arrangements.
Column (21) – Reported Claim Counts to Date – As at Prior Year-End
Enter the reported claims to date from prior year end (equivalent to column (19)).
Leave the column blank (that is, do not enter anything) if it is difficult to obtain claim count information (for example, reinsurers and assumed business).
Claim counts from prior year end should be allocated where the actuarial lines of business or definition of claim count have changed from the prior year end.
Column (22) – Bornhuetter-Ferguson Initial Expected Loss Ratio Assumptions
Enter the expected loss ratio assumptions used in the Bornhuetter-Ferguson or the expected loss ratio method to estimate ultimate loss for the current year’s valuation. Leave the column blank (that is, enter nothing) if neither method is used for an actuarial line of business.
Column (23) – Risk Adjustment
Enter the risk adjustment amount in column 23.
Column 24 – Risk Adjustment (%)
Risk adjustment as a percentage of the present value of future cash flows (column (07)).
Line 13 – ULAE – Total
Enter discounted unpaid ULAE, including risk adjustment if applicable, in tab “Exhibit – Total – Gross” and tab “Exhibit – Total – Ceded”.
Line 14 – “Facility Association” and “Plan”
Enter the liabilities for insurance contracts assumed from all automobile pools (for example, Facility Association, Ontario Risk Sharing Pool and Plan de Répartition des Risques) in tab “Exhibit - Total - Gross”. Enter the assets for cessions to all automobile pools in tab “Exhibit – Total – Ceded”.
Line 15 – Other Provisions
Enter the fulfilment cash flows for all other provisions (for example, provisions for non-material lines of business, non-automobile industry pools, inter-company reinsurance, directly attributable expenses that are not included in allocated loss adjustment expense and ULAE) in tab “Exhibit – Total - Gross” and tab “Exhibit – Total – Ceded”.
Line 16 – Grand Total
This is the total of lines 12 through 15 of column 12 of the “Total” exhibit.