| excessive growth charge |
| 140 |
| PREMIUM & LOSS INFORMATION |
LOB 1 |
LOB 2 |
WC |
| industry average L+LAE ratio (10 yr avg) |
|
|
1.071 |
| company average L+LAE ratio (10 yr avg) |
|
|
|
| industry L+LAE ratio (current yr) |
|
|
|
| adjustment for investment income |
|
|
|
| company NWP (current yr) |
|
|
|
| company U/W expense ratio (current yr) |
|
|
|
| portion of reserves on retro-rated plan: next 2 lines |
– |
– |
– |
| proportion that's direct loss-sensitive |
|
|
|
| proportion that's assumed loss-sensitive |
|
|
|
| R5 RBC charge after loss-sensitive discounts |
|
|
? |
Equation 4
R5 base RBC (WC)
= (current yr NWP) x [ (C x A) + U - 1 ]
C
= company RBC L+LAE ratio
A
= adjustment for investment expense
U
= company U/W expense ratio
C is a 50/50 weighting between:
industry L+LAE ratio adjusted for company experience
industry L+LAE ratio adjusted for company experience
= industry L+LAE ratio x (company average L+LAE ratio) / (industry average L+LAE ratio)
Equation 5
R5 after discount (WC)
= R5 base RBC (WC) – LSD
LSD
= R5 base RBC (WC) x (D% + A%)
D%
= 30% x (proportion that's direct loss-sensitive)
A%
= 15% x (proportion that's assumed loss-sensitive)
Equation 6
Final RBC after applying PCF (all lines)
= (all lines RBC total before PCF) x PCF + (growth charge)
PCF
= 0.7 + 0.3 x (max NWP by line) / (total NWP)
Solution:
| R5 total RBC charge for all lines |
|
| basic R5 charge (WC) |
|
| LSD (WC) |
|
| PCF (all lines) |
0 |
| C |
|
| industry L+LAE ratio |
|
| industry L+LAE ratio adjusted for company experience |
|
| A |
|
| U |
|
