RBC for Holding Companies

This is an example of how to calculate the R₁ and R₂ charges when the insurer owns shares in a holding company. Note: The calculation is essentially the same for R₁ and R₂. The only difference is that you use only fixed income assets for R₁ and only equity assets for R₂.

Given:

Here we calculate the R₁ charge for holding companies because the table below only provides information about fixed income assets.

• market(HC) = 600 (market value of holding company HC)

• ownership % = 80% (insurer has 80% ownership in the holding company)

type of asset	book value of asset (fixed income)	distribution
subsidiary 1	100	20%
subsidiary 2	300	60%
cash	50	10%
other assets	50	10%

Solution: