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 (R_{0}...R_{5}) 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 R_{3} and R_{4}.

(ii)

Asset concentration can be split in any proportion between R_{1} and R_{2}. (I chose 100% for R_{2})

(iii)

Other non-insurance subs can go into R_{1}, or R_{2}. (There is not enough information provided to determine. I chose R_{1}) 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)