RBC for Holding Companies

This is an example of how to calculate the R₁ and R₂ charges when the insurer owns shares in a holding company. Note': The calculation is essentially the same for R₁ and R₂. The only difference is that you use only fixed income assets for R₁ and only equity assets for R₂.

Given:

market(HC) = 600 (market value of holding company HC)

ownership % = 80% (insurer holds this percentage ownership in the holding company)

! type of asset	asset	distribution
subsidiary 1	100	20%
subsidiary 2	300	60%
cash	50	10%
other assets	50	10%