Difference between revisions of "Expanded R0 Formula for Market Method"
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I do not believe you would be required to memorize this. There are too many other important RBC topics. It's possible you'd be asked to calculate R<sub>0</sub> for a simple case and the examples on the main RBC page are representative of that. | I do not believe you would be required to memorize this. There are too many other important RBC topics. It's possible you'd be asked to calculate R<sub>0</sub> for a simple case and the examples on the main RBC page are representative of that. | ||
| + | |||
| + | The source text states that R<sub>0</sub> using the market method has 2 components: | ||
| + | * R<sub>0</sub> component | ||
| + | * R<sub>2</sub> component | ||
| + | In the table below, I've labelled these as "A" and "B". | ||
:{| class='wikitable' | :{| class='wikitable' | ||
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:: A = min[ affiliate RBC x (<span style="color: green;">'''ownership%'''</span> of common stock) , (statutory surplus of affiliate) x (<span style="color: green;">'''ownership%'''</span> of common stock) | :: A = min[ affiliate RBC x (<span style="color: green;">'''ownership%'''</span> of common stock) , (statutory surplus of affiliate) x (<span style="color: green;">'''ownership%'''</span> of common stock) | ||
* If (affiliate RBC) x <span style="color: green;">'''ownership%'''</span> of common stock > (value of common stock as recorded by reporting entity) <u>then</u> | * If (affiliate RBC) x <span style="color: green;">'''ownership%'''</span> of common stock > (value of common stock as recorded by reporting entity) <u>then</u> | ||
| − | :: B = (value of common stock as recorded by reporting entity) - A | + | :: B = (value of common stock as recorded by reporting entity) - A ← ''cannot be less than 0'' |
* Otherwise calculate B like this: | * Otherwise calculate B like this: | ||
:: B = MAX[ (value of common stock as recorded by reporting entity) - 22.5% x (pro-rata statutory surplus of affiliate), | :: B = MAX[ (value of common stock as recorded by reporting entity) - 22.5% x (pro-rata statutory surplus of affiliate), | ||
| − | :: (affiliate RBC) x (<span style="color: green;">'''ownership%'''</span> of common stock ) - A | + | :: (affiliate RBC) x (<span style="color: green;">'''ownership%'''</span> of common stock ) - A ] ← ''cannot be less than 0'' |
|} | |} | ||
Latest revision as of 22:36, 24 April 2022
I do not believe you would be required to memorize this. There are too many other important RBC topics. It's possible you'd be asked to calculate R0 for a simple case and the examples on the main RBC page are representative of that.
The source text states that R0 using the market method has 2 components:
- R0 component
- R2 component
In the table below, I've labelled these as "A" and "B".
R0 (common stocks) using market method = A + B - where
- A = min[ affiliate RBC x (ownership% of common stock) , (statutory surplus of affiliate) x (ownership% of common stock)
- If (affiliate RBC) x ownership% of common stock > (value of common stock as recorded by reporting entity) then
- B = (value of common stock as recorded by reporting entity) - A ← cannot be less than 0
- Otherwise calculate B like this:
- B = MAX[ (value of common stock as recorded by reporting entity) - 22.5% x (pro-rata statutory surplus of affiliate),
- (affiliate RBC) x (ownership% of common stock ) - A ] ← cannot be less than 0
