RBC for Holding Companies - Revision history

Graham at 17:54, 8 February 2021

2021-02-08T17:54:05Z

Graham at 17:53, 8 February 2021

2021-02-08T17:53:36Z

Graham at 17:52, 8 February 2021

2021-02-08T17:52:54Z

Graham at 17:51, 8 February 2021

2021-02-08T17:51:30Z

Graham at 20:46, 23 November 2020

2020-11-23T20:46:49Z

Graham at 20:46, 23 November 2020

2020-11-23T20:46:24Z

Graham at 20:46, 23 November 2020

2020-11-23T20:46:00Z

Graham at 20:45, 23 November 2020

2020-11-23T20:45:16Z

Graham at 20:44, 23 November 2020

2020-11-23T20:44:03Z

Graham at 20:42, 23 November 2020

2020-11-23T20:42:22Z

← Older revision		Revision as of 17:54, 8 February 2021
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	'''Given''':		'''Given''':
−
−	~~Here we calculate the R<sub>2</sub> charge for holding companies because the table below only provides information about equity assets.~~

	* market(HC) = 750 ''(market value of holding company HC)''		* market(HC) = 750 ''(market value of holding company HC)''

← Older revision		Revision as of 17:53, 8 February 2021
Line 1:		Line 1:
−	This is an example of how to calculate the R<sub>2</sub> holding company charges when the insurer owns shares in a holding company. '''Note''': The R<sub>1</sub> for holding companies seems to have been removed in the current version of Odomirok but the holding company charge for R<sub>2</sub> remains.	+	This is an example of how to calculate the R<sub>2</sub> holding company charges when the insurer owns shares in a holding company. '''Note''': The R<sub>1</sub> charge for holding companies seems to have been removed in the current version of Odomirok but the holding company charge for R<sub>2</sub> remains.

	'''Given''':		'''Given''':

@@ Line 1: / Line 1: @@
-This is an example of how to calculate the R<sub>1</sub> and R<sub>2</sub> holding company charges when the insurer owns shares in a holding company.  '''Note''': The R<sub>1</sub> for holding companies seems to have been removed in the current version of Odomirok but the holding company charge for R<sub>2</sub> remains.
+This is an example of how to calculate the R<sub>2</sub> holding company charges when the insurer owns shares in a holding company.  '''Note''': The R<sub>1</sub> for holding companies seems to have been removed in the current version of Odomirok but the holding company charge for R<sub>2</sub> remains.
 '''Given''':
@@ Line 9: / Line 9: @@
 * ownership % = 80% ''(insurer has 80% ownership in the holding company)
-* table showing the fixed income assets for the holding company HC:
+* table showing the equity assets for the holding company HC:
 ::{| class='wikitable' style='text-align: center;'
 |-
-! type of asset !! book value of asset <br> (fixed income) !! distribution
+! type of asset !! book value of asset <br> (equity assets) !! distribution
 |-
 | style='text-align: left;' | subsidiary 1  || 100   || 20%
@@ Line 34: / Line 34: @@
 :{| class='wikitable'
 |-
-| '''R<sub>1</sub> charge for holding company''' &nbsp; = &nbsp; 0.225 &nbsp; x &nbsp; [ market(HC) &nbsp; &ndash; &nbsp; CV(subs) ] &nbsp; x &nbsp; ( ownership % )
+| '''R<sub>2</sub> charge for holding company''' &nbsp; = &nbsp; 0.225 &nbsp; x &nbsp; [ market(HC) &nbsp; &ndash; &nbsp; CV(subs) ] &nbsp; x &nbsp; ( ownership % )
 |}
@@ Line 50: / Line 50: @@
 Then the final answer is:
-: '''R<sub>1</sub> charge for holding company''' = 0.225 x [ 750 &ndash; 562.5 ] x 80% = <u>33.75</u>
+: '''R<sub>2</sub> charge for holding company''' = 0.225 x [ 750 &ndash; 562.5 ] x 80% = <u>33.75</u>
 ''(if the calculated value is negative then the RBC charge is 0)

@@ Line 1: / Line 1: @@
-This is an example of how to calculate the R<sub>1</sub> and R<sub>2</sub> holding company charges when the insurer owns shares in a holding company. '''Note''': The calculation is essentially the same for R<sub>1</sub> and R<sub>2</sub>. The only difference is that you use only ''fixed income'' assets for R<sub>1</sub> and only ''equity'' assets for R<sub>2</sub>.
+This is an example of how to calculate the R<sub>1</sub> and R<sub>2</sub> holding company charges when the insurer owns shares in a holding company.  '''Note''': The R<sub>1</sub> for holding companies seems to have been removed in the current version of Odomirok but the holding company charge for R<sub>2</sub> remains.
 '''Given''':
-Here we calculate the R<sub>1</sub> charge for holding companies because the table below only provides information about fixed income assets.
+Here we calculate the R<sub>2</sub> charge for holding companies because the table below only provides information about equity assets.
 * market(HC) = 750 ''(market value of holding company HC)''

@@ Line 57: / Line 57: @@
 * The RBC charge related to the <u>carrying value</u> of the subs is already included in the R<sub>0</sub> charge.
-* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company.)'' This is to avoid double-charging the subs.
+* That's why we apply the 0.225 factor to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company.)'' This is to avoid double-charging the subs.
 : <span style="color: green;">''(awesome shout-out to PA!)''</span>

← Older revision		Revision as of 20:46, 23 November 2020
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	* The RBC charge related to the carrying value of the subs is already included in the R<sub>0</sub> charge.		* The RBC charge related to the carrying value of the subs is already included in the R<sub>0</sub> charge.
	* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company.)'' This is to avoid double-charging the subs.		* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company.)'' This is to avoid double-charging the subs.
		+	: <span style="color: green;">''(awesome shout-out to PA!)''</span>

@@ Line 56: / Line 56: @@
 <span style="color: red;">'''Bonus Fact''':</span>
-* The RBC for the carrying value of the subs is already included in the R<sub>0</sub> charge.
+* The RBC charge related to the carrying value of the subs is already included in the R<sub>0</sub> charge.
-* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company. Otherwise we would be double-counting.)''
+* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company.)'' This is to avoid double-charging the subs.

← Older revision		Revision as of 20:44, 23 November 2020
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	<span style="color: red;">'''Bonus Fact''':</span>		<span style="color: red;">'''Bonus Fact''':</span>

−	* The ~~reason~~ for ~~applying~~ the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ~~of the subs is that~~ the ~~RBC for the carrying~~ value of the ~~subs is already included in the R<sub>0</sub> charge~~.	+	* The RBC for the carrying value of the subs is already included in the R<sub>0</sub> charge.
		+	* That's why we apply the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value ''(and not to the full value of the holding company. Otherwise we would be double-counting.)''

← Older revision		Revision as of 20:42, 23 November 2020
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	''(if the calculated value is negative then the RBC charge is 0)		''(if the calculated value is negative then the RBC charge is 0)
		+
		+	<span style="color: red;">'''Bonus Fact''':</span>
		+
		+	* The reason for applying the 0.225 charge to the <u>difference</u> between the holding company value and the carrying value of the subs is that the RBC for the carrying value of the subs is already included in the R<sub>0</sub> charge.