Unauthorized Reinsurer RP formula
The first part (T-C) supposed to include all the shortfall between total recoverable and the collateral. I don't understand the logic to add the second part (20%(P^n_90 + T^d). It seems to be assuming the collateral to be unreliable in that case.
Comments
Think of that second part as a supervisory penalty for using unauthorized reinsurance, instead of authorized.