2014_1-Spring #20a
Below are my queries regarding this question. Appreciate someone could help to explain.
1. Why the last charge factor is 20(0.01) insted of 20(0.05) ?
2. How do I get the ratio for adjustment for reins is 1/2 ?
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Below are my queries regarding this question. Appreciate someone could help to explain.
1. Why the last charge factor is 20(0.01) insted of 20(0.05) ?
2. How do I get the ratio for adjustment for reins is 1/2 ?
Comments
The ".01" in the first answer is a typo. It is the correct ".05" in the second answer.
The rule is that half the charge for reins recoverable is applied to the Credit Risk component, and the other half to the Reserve Risk component (R4).