Capping will not be permitted under the following circumstances:

exam6passerexam6passer
in FSCO.TechNotes

Capping will not be permitted under the following circumstances:
 Base rate changes only;
 Broker portfolio transfers or acquisitions;
 Premium decreases (negative capping).

can you elaborate more why capping is not permitted in these 3 circumstances?

Comments

  • Staff-T1Staff-T1
    1) You can't really cap if it's just a base rate change as that wouldn't make sense. That just means you as talking a lower rate change
    2) I do not know about this
    3) Basically saying if someone should be charged a lower premium based on the dislocation, you can't cap the rate decrease at 0 and have to let it flow through
  • AndrewLAndrewL

    Hi @Staff-T1,

    Thanks for your response. How does point 3) holds for territorial relativities. From FSCO PPA We say that territorial changes cannot exceed +/- 10% current rates.

  • Staff-T1Staff-T1

    This is talking about overall dislocation, not specifically looking at one rating variable

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