Fall 2015 # 23

mec06emec06e
edited February 2023 in COPLFR.SAO

in the solutions for part C it states "If 10% of recorded reserve is greater than Adjusted Capital less CAL, then the NAIC Financial Analysis Handbook suggests that there is a presumption of a risk of material adverse deviation"
Is this still a relevant answer?
and if so where would this be covered in the BTs?

Comments

  • grahamgraham
    edited February 2023

    It's referring to the Bright Line Indicator Test. That's discussed here:

    Here's a screen shot of exactly where it is:

    So yes, it's still relevant.

  • anonydeanonyde

    Would $1.1M = 15.7M - 14.6M be acceptable for one of the 4 materiality standards in part a?

  • grahamgraham
    edited April 10

    It looks like you are calculating:

    • materiality standard = (top end of reasonable range) - (carried reserves)

    I don't think that would be acceptable because then there would NEVER be risk of material adverse deviation. This is because we would always have:

    • (carried reserves) + materiality standard = (top end of reasonable range)

    And this statement needs to be "less than" or "<" for RMAD to exist.

  • anonydeanonyde

    I see. Thanks!

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