A life insurance company has estimated capital requirements for each of the following risk classes: asset risk-affiliate

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A life insurance company has estimated capital requirements for each of the following risk classes: asset risk-affiliate (C0) = $2 million, asset-risk common stock

(C1cs) = $5 million, asset-risk other investments (C1o) = $1.5 million, insurance risk (C2) = $4 million, interest rate risk (C3a) = 3.5, credit risk (C3b) = 2.5, market risk (C3c) = $1 million, business risk (C4a) = $3 million, and administrative expense risk (C4b) = 0.5 million.

a. What is the required risk-based capital for the life insurance company?

b. If the total surplus and capital held by the company is $11.34 million, does it meet the minimum requirements?

c. How much capital must be raised to meet the minimum requirements?

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