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koudai8 07-29-2017 10:11 AM

A few questions regarding GAAP vs IFRS
 
I am doing a research project on GAAP vs IFRS for Variable Annuities, and the following questions came about.

1. When future cash flow is insufficient, we must write down the deferred acquisition cost or increase reserve. But what would happen if we didn't?

2. How does increase reserves alleviates the insufficient future cash flow problem?

3. When calculating reserving for variable annuities, what formula/method is usually used? I know people follow SOP 03-1 for insurance products (they use benefit ratio?), but what about those with embedded derivatives (like GMDB/GMIB)?

4. Are embedded derivatives all valued at fair value under GAAP and IFRS if possible? Is fair value: use market value if possible, otherwise use stochastic scenarios?


Please correct me whenever I am wrong.

Thanks


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