Difference between revisions of "Bright Line Indicator Test"
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| Line 7: | Line 7: | ||
:: IF | :: IF | ||
| − | ::: <span style="color: red;'>'''[1]'''</span> the AA <u>does not</u> address material deviation | + | ::: <span style="color: red;'>'''[1]'''</span> the AA <u>does not</u> address material adverse deviation |
::: <span style="color: red;'>'''[2]'''</span> 10% x (net L & LAE) > TAC – CAL | ::: <span style="color: red;'>'''[2]'''</span> 10% x (net L & LAE) > TAC – CAL | ||
:: THEN | :: THEN | ||
::: financial analyst should pursue comments from the AA | ::: financial analyst should pursue comments from the AA | ||
| + | |||
| + | '''Example''': | ||
| + | |||
| + | : Suppose the AA did not address material adverse deviation and that: | ||
| + | |||
| + | :: '''net L & LAE''' = 500 | ||
| + | :: '''TAC''' = 600 | ||
| + | :: '''ACL''' = 280 | ||
| + | |||
| + | : Then: | ||
| + | |||
| + | :: 10% x (net L & LAE) = 10% x 500 = '''50 > 40''' = (600 – 560) = (TAC – CAL) = (TAC – 2 x ACL) | ||
| + | |||
| + | : Therefore, the financial analyst should pursue comments from the AA regarding material adverse deviation. | ||
Revision as of 14:01, 7 September 2019
The Bright Line Indicator Test is discussed in COPLFR.SAO as part of the SAO but it requires knowledge from the RBC chapter in Odomirok, Alice's 1st Day. That section will only take a few minutes to read so you should do that before proceeding.
Question: what is the bright line indicator test
- IF
- [1] the AA does not address material adverse deviation
- [2] 10% x (net L & LAE) > TAC – CAL
- THEN
- financial analyst should pursue comments from the AA
- IF
Example:
- Suppose the AA did not address material adverse deviation and that:
- net L & LAE = 500
- TAC = 600
- ACL = 280
- Then:
- 10% x (net L & LAE) = 10% x 500 = 50 > 40 = (600 – 560) = (TAC – CAL) = (TAC – 2 x ACL)
- Therefore, the financial analyst should pursue comments from the AA regarding material adverse deviation.
