Transcription of Risk Based Capital (RBC)
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Risk Based Capital (RBC)
Risk Based Capital (RBC) for an Illinois Based Insurance Company May 11, 2018 Undergraduate Researchers: Dong Shin (Bill) Seol, Qinxue Liu, Chuyi Ma, Kexin Liu Faculty Mentor: Klara Buysse University of Illinois at Urbana-Champaign 1 Table of Contents Introduction to RBC System 2 Risk Based Capital Ratio 5 Required Risk Based Capital 6 C-1 Asset Risk 7 C-2 Insurance Risk 12 C-3. Interest Rate Risk 13 C-4. Business Risk 17 Examples: Allstate Cooperation 20 Calculation of An Illinois- Based Company 21 Reference 23 2 Introduction to RBC System In the 1980s, hundreds of insurance industries went into insolvencies in North America. Policyholders, insurance companies employees, creditors and shareholders of companies, and the general public suffered from this insurance crisis. Economists and actuaries saw the weakness in the fixed Capital standards from this crisis, and decided to improve it.
NAIC class 1 bonds contains Standard and Poor’s rating from AAA to A-, all getting a risk factor of 0.003. Under the new proposal, an S&P rating of AAA is equivalent to NAIC rating of . 9 1-A, with a risk factor of 0.0021. An S&P AA- bond will be classified as NAIC 1-D bond, and
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