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 retrorated plan: next 2 lines 
– 
– 
– 
proportion that's direct losssensitive 



proportion that's assumed losssensitive 



R_{5} RBC charge after losssensitive discounts 


? 
Equation 4
R_{5} 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
R_{5} after discount (WC)
= R_{5} base RBC (WC) – LSD
LSD
= R_{5} base RBC (WC) x (D% + A%)
D%
= 30% x (proportion that's direct losssensitive)
A%
= 15% x (proportion that's assumed losssensitive)
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:
R_{5} total RBC charge for all lines 

basic R_{5} charge (WC) 

LSD (WC) 

PCF (all lines) 
0 
C 

industry L+LAE ratio 

industry L+LAE ratio adjusted for company experience 

A 

U 
