negative RBC charge

jasonchwjasonchw
in Odomirok.19-RBC

In the 4 practice problems like 2014.Fall #18, the 2nd question contains negative charge which was mentioned in the note should be set to 0 before combing.

I wonder if there is any situation a negative RBC charge will happen for all R0 to Rcat ( i can only imagine -ve charge for R5 based on formula)?

Comments

  • Staff - ACStaff - AC

    The purpose of RBC is to define a capital amount for contingencies. R5 is partially based on company's performance. If it performed really well (i.e. low loss ratio), then the formula can produce a negative charge, as seen here. However, the other risk categories inherently possess a downside risk. It is next to impossible to see a negative charge for them.

  • jasonchwjasonchw

    Thanks. To clarify, even there is a -ve value for R5 like the question 2 in "4 practice problems like 2014.Fall #18", i should set it to 0 before further proceeding, right?

  • Staff - ACStaff - AC

    Odomirok does not make an explicit statement on this either way, but I think this is the logical way to proceed.

Sign In or Register to comment.