timed out BattleActs100

Calculating the RBC Charge

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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.

  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 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)

Solution:
RBC charge 987,654
    low end of surplus range 123,456
    HIGH end of surplus range 789,123
Individual Charges:
R0 000
R1 111
R2 222
R3 333
R4 444
R5 555
Weighting Grid:
item RBC charge R0 R1 R2 R3 R4 R5
Investment income due and accrued 10 1.0
Federal income tax recoverable 10 1.0
Recoverable (parent/subs/affiliates) 10 1.0
Reinsurance recoverable 10 0.5 0.5
Reserve 10 1.0
Written premium 10 1.0
Cash and cash equivalents 10 1.0
Unaffiliated bonds 10 1.0
Unaffiliated stocks 10 1.0
Real estate 10 1.0
Asset concentration 10 1.0
Other non-insurance subs 10 1.0
Investments in insurance affiliates 10 1.0