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Flashcards in B1. The Rs Deck (10):
1

R0

Subsidiary Insurers:
-Insurance Subsidiaries (Stock Investment)
-Insurance Subsidiaries (Preferred Stock Investment)
-Insurance Subsidiaries (Bond Investment)
-Investments in Alien Insurance Affiliates
-Off Balance Sheet and Other Items

2

R1

Fixed Income Investments:
-Holding Company
-Upstream Affiliate
-Insurance Subsidiaries not subject to RBC
-Investment Affiliates
-Other Non-Insurance Subsidiaries
-Unaffiliated Bonds and Bond Size Factor
-Mortgage Loans
-Miscellaneous Assets
->Cash, net cash equivalents, other short term investments
->Admitted Collateral Loans
-Replication Transactions
-Mandatorily Convertible Securities
-Off-Balance Sheet Collateral and Schedule DL, Pt 1, Assets

3

R2

Equity Investments:
-Holding company/Certain Affiliates/Off-Balance Sheet collateral
-Replication transactions/mandatorily convertible securities
-Insurance Affiliates that are Subject to RBC(common stock excess of amount allocated to R0)
-Unaffiliated Common Stocks
-Preferred Stocks
-Real Estate, Schedule BA
-Miscellaneous assets
->Other long term assets other than collateral loans
->Receivables for securities
->Agg write-ins for invested assets
->Derivatives

Don't forget asset concentration factor (Doubles RBC charge of 10 largest issuers)

4

R3

Credit Risk:
Non Invested Assets
Reinsurance Recoverables
Health credit Risk

5

R4

Reserve Risk:
Reinsurance RBC
RBC by Line

Adjust for loss sensitive
Adjust for loss concentration
Adjust for premium growth (.45)

6

R5

Written Premium Risk:
-Net Written Premium RBC by line

Adjust for loss sensitive
Adjust for premium concentration
Adjust for excessive growth (.225)

7

Asset changes: Diversification in the financial portfolio and concentration(with respect to # of insurers)

Bond size adjustment factor increases the RBC charge and is higher when there are a fewer number of bond issuers.

RBC Asset concentration factor doubles the asset risk charge for the company's ten largest investments.

8

Risks included in the different sections

R0-Subsidiary Insurers
R1-Fixed Income
R2-Equity
R3-Credit
R4-Reserve
R5-Net Written Premium

9

RBC two main components

RBC Formula
RBC model act for insurers

10

What is the rationale for Using 50% of reported value?

The RBC charge has averaged about 50% of the carrying value