Capital and surplus
In the context of the financial resources supporting EQ risk, is the capital and surplus referring to the line items under Shareholders' Equity in the statement of liability and equity. (Common Shares, Preferred Shares, Contributed Surplus, etc...)
If this is the case, I see that Nuclear and Other Reserves is also under the Shareholder's Equity. In 2019 Spring Q18, the earthquake premium reserve is given as 10,000. But when calculating the 10% of capital and surplus, the sample answer didn't add the earthquake premium reserve as part of the capital and surplus. Could you please explain this part? I guess I'm also confused as to is the "Nuclear and Other Reserves" in the financial statement equal to the Earthquake Reserve or the Earthquake Premium Reserve.
Comments
For Canadian insurers, the amount of capital and surplus corresponds to a maximum of 10% of total equity as at the end of the reporting period being filed (here). However, items labeled as "Nuclear and Other Reserves" under Shareholders' Equity are typically allocated for specific, non-earthquake-related exposures. Unless explicitly stated in the MCT Guideline, these reserves are not considered part of the financial resources available to support earthquake risk.
So in the case of spring Q18, "Nuclear and contingency reserves" are left out of all calculations (although it's 0 anyways) as it's not considered a financial resource. The MCT Guideline requires insurers to establish specific reserves to address potential earthquake exposures. These reserves are distinct from the general capital and surplus, and distinct from "Nuclear and Other Reserves".