RBC

Question 1

Base Loss and LAE Reserve RBC

Answer 1

[[ [ Company RBC % + 1] * Adj For Investment Income ] - 1] *

[Net L&LAE Reserve + Other Discounts Not in Reserves]

Question 2

R4: Company RBC %

Answer 2

Average of ( Expected Industry Reserve RBC %,

Expected Industry Reserve RBC % * (Company/Industry))

Question 3

Excessive Premium Growth Charge

Answer 3

3YR Avg Growth in GWP (capped at 40%) exceeding 10% x 45% x Net L&LAE Reseves

*Note that Avg GWP growth is on ALL lines combined

Question 4

Adjustment for Loss Concentration

Answer 4

LCF = 30% * Net L&LAE Reserves in Largest Line / Total Net L&LAE Reserves + 70%

LCF * Total Reserve RBC After Discounts All Lines

Question 5

R4: Company Development Factor

Answer 5

MIN( Sum of Incurred Loss & DCC from 9 Prior AY’s evaluated as of current year / Sum of Initial Valuations of the same AYs, 400%)

Question 6

R4: Adjustment for Loss-Sensitive Business

Answer 6

(30% for Direct & 15% for Assumed) * % LS L&LAE Reserves * Base L&LAE Reserve RBC

Question 7

R5: Company RBC Loss & LAE Ratio

Answer 7

AVG( Industry RBC L&LAE ratio, Industry RBC L&LAE * (Company / Industry) )

Question 8

Base Net Written Premium RBC by Line

Answer 8

Current Year NWP (Company RBC Loss Ratio * Adj for Inv. Income + UW Exp Ratio - 1)

Question 9

Premium Concentration Factor

Answer 9

0.3 * (NWP Largest Line / NWP All Lines) + 0.7

Question 10

What is the calculation order for R5?

Answer 10

1. Base RBC
2. Loss Sensitive Discount
3. Premium Concentration
4. Excessive Premium Growth