RBC capital required = CAL or ACL?
When using the RBC formula with the covariance adjustment, does this equal the ACL capital or the CAL capital? The reading states that "The RBC formula results in a minimum level of required capital determined (the authorized control level benchmark, or ACL)". The wiki states "RBC (ratio) denominator: ACL capital = 50% x (RBC Capital Required)" and the formula sheet states that the RBC capital required is the CAL capital. So, is the RBC formula with covariance adjustment = RBC Capital Required = CAL capital? And 50% of RBC capital required = ACL capital = MINIMUM capital required?
Comments
The term Authorized Control Level (ACL) has two meanings. One is the denominator of the RBC Ratio, which is 50% of formula-determined RBC. The other is the regulatory intervention level. The regulator is authorized to take control of the company, if the RBC ratio is 70 to 100%. It is confusing. . .
The regulatory intervention level of Company Action Level (CAL) is applied when RBC Ratio is 150 to 200%. The Cheat Sheet made a false equivalency. Their thinking was, 200%50%RBC = RBC. But the so-called "CAL capital" is a range, so it cannot be equal to RBC.
We will make the correction on the Cheat Sheet.