Fin Resources

AndrewLAndrewL
in OSFI.Eqk

Hi,

When we use 10% of Capital and Surplus, is capital the same as capital available calculated in MCT?

That is sum of:
1. Category A, B, C
2. NCI if applicable
3. Adjustments to Capital available such as CSM for title, unregist reinsurance etc.
4. Adjustment for capital composition?
5. Call the final result say alpha

Then financial resources = 0.1* alpha + others?

Comments

  • Staff-T1Staff-T1

    I believe so, but it is not explicitly mentioned in the MCT paper

  • AndrewLAndrewL

    Thanks @Staff-T1.

    I find this a bit confusing for the following reason:

    1. Some past exam question and battleact web question on calculating cap required(earthquake) = 1.25*(EPR+ERC), call this total earthquake reserve.
    2. But earthquake reserve is part of capital available through category A (RC-CORNA), through nuclear and earthquake reserve.
    3. For ERC, we use 10% of capital and surplus.
    4. Therefore, 1) rely on 2) and 2) rely on 1) LOL.

    Please let me know if I am getting it wrong.

    Thanks!

  • Staff-T1Staff-T1

    I believe this thread here is relevant: https://battleactsmain.ca/vanillaforum/discussion/963/earthquake-premium-reserve#latest

  • NycxBattleNycxBattle

    for the Hint CREC it

    for E which stands for EPR, why are we not Earthquake Reserve, but the Earthquake premium reserve? Wouldn't the EQ Reserve be bigger and can absorb more loss?

  • Staff-T1Staff-T1

    I believe its cause if you actually algebraically manipulate the ERC formula from first principles, the EQR, depends on the ERC which depends on the financial resources so there is some circular logic here

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