Fall 2015 # 23
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
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.
Would $1.1M = 15.7M - 14.6M be acceptable for one of the 4 materiality standards in part a?
It looks like you are calculating:
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:
And this statement needs to be "less than" or "<" for RMAD to exist.
I see. Thanks!