R5

Question 1

R5 covers risk associated with

Answer 1

NWP
Excessive premium growth
Health premium
Health stabilization

Question 2

Base NWP RBC by line

Answer 2

CY NWP * (Company RBC loss ratio * adjustment for investment + UW expense ratio - 1)

Question 3

Company RBC loss & LAE ratio

Answer 3

Straight average of industry RBC loss and LAE ratio and industry RBC loss and LAE ratio adjusted for company experience

Question 4

Adjustment for company experience, R5

Answer 4

Straight average of 10 AY net loss & LAE ratios divided by industry average loss & LAE ratio

Question 5

Premium concentration factor

Answer 5

0.3 * (max NWP by line) / (total NWP) + 0.7

Question 6

Excessive premium growth factor, R5

Answer 6

0.225 * average growth rate factor

Question 7

Total adjusted capital

Answer 7

Surplus - non-tabular discount - tabular discount (medical reserves)

Question 8

RBC ratio

Answer 8

Total adjusted capital / ACL

Question 9

Company Action Level

Answer 9

150% - 200%; Company submits plan to commissioner explaining how it will obtain capital or reduce risks

Question 10

Regulatory Action Level

Answer 10

100% - 150%; DOI has right to take corrective action, company submits plan

Question 11

Authorized Control Level

Answer 11

70% - 100%; Commissioner authorized to take control of insurer

Question 12

Mandatory Control Level

Answer 12

Below 70%; Commissioner must rehabilitate or liquidate

Question 13

Trend test

Answer 13

RBC ratio between 200% and 300%, combined ratio > 120%; must submit action plan to commissioner