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#1
09-23-2008, 12:48 PM
 Allacalander Member SOA AAA Join Date: May 2005 Location: pursuing Carmen Sandiego Studying for Better Parenthood College: Lenoir-Rhyne; Clemson Favorite beer: Oenophile Posts: 582
RBC ratio

In the Study note 142-08, they list two calcuations for the RBC ratio and I don't see how they are equivalent.

The first calculates it as TAC/ACL/2 (although other papers just give TAC/ACL, but that's not where I'm lost.)
Then a few lines down they give the following formula (TAC-C1)/(C2+C3+C4)

How do these agree? Or another question: what is ACL in terms of the individual C risk components?
#2
10-07-2008, 07:03 PM
 FrankieY18 Member Join Date: Sep 2003 Posts: 458

And on JAM study guide p. 139 of section 1, it says RBC ratio = TAC / ACL...so i don't know which one is right....

Other confusing thing is in FET-142, TAC is the sum of stat surplus and other things...but in FET-144, TAC is calculated from GAAP financial....mmmm

Last edited by FrankieY18; 10-15-2008 at 06:59 PM..
#3
10-08-2008, 08:11 AM
 hamstrman Member SOA Join Date: May 2006 Location: Brooklyn, NY Studying for CSP - APMV Favorite beer: The kind that isn't beer. You know that kind... Posts: 596

Quote:
 Originally Posted by Allacalander In the Study note 142-08, they list two calcuations for the RBC ratio and I don't see how they are equivalent. The first calculates it as TAC/ACL/2 (although other papers just give TAC/ACL, but that's not where I'm lost.) Then a few lines down they give the following formula (TAC-C1)/(C2+C3+C4) How do these agree? Or another question: what is ACL in terms of the individual C risk components?
Based on the RBC ratio forumula in SN 142, I would imagine the formulas are identical, but the risk components in the denominator for RBC ratio are the expected C2, C3, and C4, while the components for the ACL (being the minimum required regulatory capital) would have some margin for adverse deviation? So one IS the other with more conservatism is what I think the difference is.

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