Calculate the RBC charge, and the low/high end of the surplus range for the given action/control level.
→ (Modeled on 2017.Spring #19)
→ See footnote 1 in BattleTable about the error in the examiner's report solution.
→ Assume Rcat = 0 and operational risk charge equals 0.
current score:
0.000
RBC charge
low end of surplus range
HIGH end of surplus range
action/control level
CAL
Combined Operating Ratio
100%
(shout-out to MB!)
item
RBC charge
Investment income due and accrued
10
Federal income tax recoverable
10
Recoverable (parent/subs/affiliates)
10
Reinsurance recoverable
10
Reserve
10
Written premium
10
Cash and cash equivalents
10
Unaffiliated bonds
10
Unaffiliated stocks
10
Real estate
10
Asset concentration
10
Other non-insurance subs (put in R1)
10
Investments in insurance affiliates
10
item
RBC charge
Non-Tabular Discount
10
Tabular Discount in Reserves
10
1
You just have to figure out which risk category (R0...R5) each RBC charge goes into. Then apply the basic formula for aggregating risks.
2
This is straightforward except for 3 items:
(i)
Reinsurance recoverable is split 50/50 between R3 and R4.
(ii)
Asset concentration can be split in any proportion between R1 and R2. (I chose 100% for R2)
(iii)
Other non-insurance subs can go into R1, or R2. (There is not enough information provided to determine. I chose R1) thx beta_183!
3
TAC = PHS – NTD – TD
PHS = Policyholder Surplus
NTD = Non-Tabular Discount
TD = Tabular Discount (on medical reserves only)
Trick: This problem doesn't specify whether the tabular discount is medical or indemnity, but the examiner's report solution assumes the given tabular discount should be subtracted. Note that in (2014.Spring #20), the problem stated that the tabular discount was indemnity and points were deducted if you subtracted that amount from surplus to get TAC.
NOTE
You cannot calculate the RBC Ratio because you aren't given a specific value for TAC (Total Adjusted Capital)
