Exam 6C Practice Question 8
Study guide: Exam 6C
An insurer measures a group of multi-year contracts under the general measurement approach. At initial recognition:
| Item | Amount |
|---|---|
| Present value of future cash inflows (premiums) | 10,000 |
| Present value of future cash outflows (claims and directly attributable expenses) | 8,200 |
| Risk adjustment for non-financial risk | 600 |
Determine the contractual service margin (CSM) at initial recognition and the amount recognized in profit or loss on that date.
- A) CSM of 1,800; nothing recognized in profit or loss
- B) CSM of 0; a gain of 1,200 recognized in profit or loss
- C) CSM of 1,200; nothing recognized in profit or loss
- D) CSM of 1,200; a gain of 600 recognized in profit or loss
- E) CSM of 600; a gain of 600 recognized in profit or loss
Answer this question and see the worked solution
Concepts tested
- Contractual Service Margin
- Fulfilment Cash Flows
- Risk Adjustment for Non-Financial Risk
- General Measurement Model