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RBC Charges (R4 - Reserve Risk)

myID_+ priorDate_+ record_+ WET_+ fadeFactor_

Calculate the R4 RBC charge for reserve risk for all lines.

  current score:
0.000

R4 total RBC charge for all lines
   basic R4 charge (LOB 3)
   LSD (Loss Sensitive Discount) (LOB 3)
   LCF (Loss Concentration Factor) (all lines)
excessive growth charge
163
RBC for reinsurance recoverables *
40
* Assume 50/50 split between R3 & R4.
PREMIUM & LOSS INFORMATION LOB 1 LOB 2 LOB 3
industry average L+LAE LDF (current/initial reserve, 9 prior AYs) 1.071
company average L+LAE LDF (current/initial reserve, 9 prior AYs)
industry L+LAE RBC%
adjustment for investment income
company L+LAE reserves (gross of non-tabular discount)
---- -- -- --
portion of reserves on retro-rated plan: next 2 lines
   proportion that's direct loss-sensitive
   proportion that's assumed loss-sensitive
R4 RBC charge after loss-sensitive discounts 21.5 8.0 ?


Equation 1

R4 base RBC (LOB 3)
=   (reserves)   x   [[ (C+1) x A] - 1 ]

C
=   company RBC%

A
=   adjustment for investment expense

C is a 50/50 weighting between:

industry RBC%

industry RBC% adjusted for company experience

industry RBC% adjusted for company experience

   =   industry RBC%   x   (company average LDF) / (industry average LDF)

Equation 2

R4 after discount (L3)
=   R4 base RBC (LOB 3)     LSD

LSD
=   R4 base RBC (LOB 3)   x   (D% + A%)

   D%
=   30%   x   (proportion that's direct loss-sensitive)

   A%
=   15%   x   (proportion that's assumed loss-sensitive)

Equation 3

Final RBC after applying LCF (all lines)

=   (all lines RBC total before LCF)   x   LCF   +   (growth charge)   +   1/2 x (reins. recov. RBC)

     LCF
=   0.7   +   0.3 x (max reserve by line) / (total reserve)

Solution:
R4 total RBC charge for all lines
   basic R4 charge (LOB 3)
   LSD (LOB 3)
   LCF (all lines) 0

C
   industry RBC%
   industry RBC% adjusted for company experience
A