CapReq/CapAv for Reinsurance ceded
I notice there are some inconsistency in the calculation for D value.
On wiki page, it state: D= (UEP + O/S + Reins Recv) – (Reins Payable + NOD + LOC) ; where
LOC= min[ LOC, (UEP + O/S) x 30% ] (Amounts for LOCs are limited, but the limit is applied in aggregate. See notes 2a & 2b below.)
But in the exam report, i don't see we include that 30% (for example Spring 2015 Q23-b)
Could someone please confirm when do we need to calculate the D* (for capavail only, or capreq as well?) thank you!
Comments
The wiki is correct (Refer to page 18 of the MCT guidance). In spring 2015, the (UEP + O/S)*0.3 is = 3600 > 3000 so we just used 3000. Bear in mind that when these reports are written, it's just a sample of an answer that received full credit. It is not meant to be a comprehensive step-by-step guide for candidates on how to solve a question -> Which is why it is important to understand the material and not just memorize the examiner's reports!