Insurance Affiliates subject to RBC (Common Stock other than Equity method)
Odomirok P251-P252 mentions the following:
For all other insurance affiliates (other than equity method), the R0 charge for ownership of common stock in these affiliates is made up of two components:
1. An R0 component = min[ affiliate RBC x (ownership% of common stock) , (statutory surplus of affiliate) x (ownership% of common stock) ]
2. An R2 component, which is equal to one of the following (limited to a minimum of zero):
a. The amount of the book/carrying value that exceeds the value from the R0 component (above), when the total RBC of the affiliate multiplied by the percentage of ownership in the common stock is greater than the book/carrying value; otherwise
b. The maximum of the following:
i. The excess of the book/adjusted carrying value over the pro rata statutory surplus value for the affiliate multiplied by 22.5%; or
ii. The amount that RBC of the affiliate multiplied by the percentage of ownership in the common stock exceeds the value obtained in the R0 component (above).
For R0 (common stocks) using any other method, The wiki article only mentions R0 component. I assume that we need to add R2 component to R0 component to calculate R0 charge.
Comments
Yes, go ahead. This was an error in the wiki and we will rectify it soon. Thank you for pointing it out.