Spring 2015 #23b

thesuperactuarythesuperactuary
in OSFI.MCT

Since on the wiki page, it states that the formula to calculate the capital required for unregistered reinsurance is incorrect. Could you please do the correct way ? I seem to get the negative value here. Thank you!

Comments

  • grahamgraham

    Good Morning @thesuperactuary!

    I've copied and highlighted the piece of the examiner's report solution that's incorrect:

    It's incorrect because they did the comparison backwards. The limit on category C shares is 2,380 but the actual value is only 2,000. Therefore the full 2,000 of category C shares can be used as part of capital available.

    So the solution should have stated:

    • category BC excess = 400 (which they did correctly)
    • category C excess = 0 (which they did incorrectly because they stated 380)

    Then you have to take the max of 400 and 0, which is 400, and then deduct 400 from the capital available.

    This did not affect their final answer however because they took the maximum of 400 and 380, which was still 400, and so they correctly deducted 400 anyway. It was just luck they got it right.

    Everything else about their solution is correct.

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