IFRS 17 for a Unit Linked Policy

Professional Actuarial Topics Life Insurance
1

Hello to everyone, I have the following question regarding the CSM under VFA.

Suppose you have a UL policy with the difference between inflows and outflows be negative (let’s say -100), i.e the policy is loss-making.

Moreover suppose that the Risk Adjustment, although it exists, is immaterial and held to 0, for simplicity.
Therefore the fulfilment cash flow (FCF) is -100+0=-100.
The CSM at initial recognition is max(-FCF,0)=100. Therefore, I recognize a positive unearned profit at inception although the policy is loss making.

What am I missing here? Is my thinking right?

Thank you all for your time

2

If the policy is onerous, there is no CSM.
Losses are recognized immediately.

3

Thank you for your reply.

Therefore i have to write a loss component of -100? Should I amortize it?

4

Yes. Loss component of -100. No, losses are recognized upfront, therefore no amortization.

5

Thank you !