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Question Assume Storrs Insurance Company (a Property Casualty company) has... Assume Storrs Insurance Company (a Property Casualty company) has the following data for 12/31/2016: Total
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Assume Storrs Insurance Company (a Property Casualty company) has...
Assume Storrs Insurance Company (a Property Casualty company) has the following data for 12/31/2016:
- Total Assets = $120M
- Fixed Income assets = $90M
- Equity assets = $30M
- Total liabilities= $102M
- Loss Reserves = $72M
- Unearned premium reserves = $30M
- Premiums for calendar year 2016 = $25M
Assume that for RBC purposes:
- R0 = 0
- R1 factor for its blend of fixed income assets = 4.5%
- R2 factor for equity assets=20%
- R3=0
- R4 factor for underwriting risk, loss reserves =15%, Unearned Premium reserves = 10%
- R5 factor for underwriting risk, premiums=30%
- What is the Authorized Control Level (ACL) for Storrs for year-end 2016?
- What is Total Capital at 12/31/16?
- What is the RBC Ratio?
- What do RBC rules then require of the company?Of the state insurance commissioner?
Assume that a second company Mansfield Insurance Company, is absolutely identical in all respects, except that it has a more conservative actuary, who has decided to set the loss reserves at $54M rather than $45M.
- What is the ACL for Mansfield?
- What is the RBC ratio?
- What do RBC rules then require of Mansfield?Of the state insurance commissioner?
- Which company is financially stronger?What does this say about using the RBC system to judge relative financial strength of insurers?
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