BCAR vs. FCT (DCAT) Battlecard
The battle card says they are both similar in that they test multiple events. But BCAR tests 2nd non-concurrent event. Would BCAR also test a 2nd concurrent event as well?
Also, in my understanding, this means BCAR tests 2 events in 1 test thus satisfying "testing multiple events", and FCT tests 1 event in 1 test for multiple different tests thus satisfying "testing multiple events". This is correct?
Comments
Hi,
I was reading the latest BCAR while trying to find where it states in the source that the BCAR would test a 2nd non-concurrent event and came up with a blank. I think the syllabus has changed? @graham thoughts? The latest BCAR is dated August 2021. The closest thing to that is on page 33, but that would just be testing a single event and page 33 isn't on the syllabus anymore - I do remember this point when I studied for Exam 6C but this was a long time ago ~
For your second point relating to the FCT, I would think so, yes.
Yes, that was a change when the reading was updated. In particular, the natural catastrophe stress test changed a little bit. I will take a look at that BattleCard. (When readings change, I don't always catch every instance of where an update needs to be made so thanks for mentioning it.)
Hi, I am not sure why 2018 Spring Q22 and 2015 Spring Q17 are written as "Outdated".
Do we still need to memorize this?
No you don't. It's labelled as outdated because in the latest BCAR you do not test a second catastrophic event
Can you please expand on the solution on similarities and difference between BCAR and FCT?
what specifically do you need elaboration on?
Particularly, in the similarity: Both test for multiple events. I agree how FCT still does this. Where did we do that on BCAR?
Hi @graham, you said above that BCAR does not test second CAT longer.
I understand that second catastrophe on BCAT is no longer on syllabus. But does it still exists and is just not within syllabus or does not exist at all?
Thanks!
As far as I can tell from the syllabus readings, the natural catastrophe stress test no longer incorporates a second catastrophe. Anything beyond the syllabus would not be tested. Hope that helps.
Thanks @graham
But in the screenshot above, it is written the stressed score measures impact of second catastrophe.
Can you please clarify?
The natural catastrophe stress used to incorporate 2 catastrophes but now the "normal" BCAR includes a catastrophe component so the natural catastrophe stress test only tests 1 catastrophe.
So both before and after the change to the test, the BCAR system as a whole tested 2 catastrophes. It's just organized differently now.
I'm still confused about whether there's 1 or 2 CATs tested... in the wiki, I believe there was mention to 2 catastrophes. But when reading the BCAR.Cat reading, the stressed BCAR score measures the balance sheet strength after a CAT event, but does not specify whether this would be the 1st CAT or 2nd CAT. I know the standard BCAR score includes a capital requirement for one CAT event (B8) so i'm not sure. Is the testing of 2 CATs completely irrelevant now?
Thanks in advance.
It is 2 Cats tested as Graham alluded to above and the stressed BCAR score measures BS strength after the second cat event. The wiki is pretty clear on this
if we are asked to compare the difference & similarity of BCAR and FCT, similarity is that they both test multiple events, what is the best answer for the difference?
Would a difference be that BCAR applies qualitative adjustments while FCT does not?
I think that would be an acceptable answer.
Would this be an appropriate answer to a similar type of question for BCAR and FCT?
Under BCAR they simulate the insurers ability to withstand a a second catastrophe event where the first catastrophe event considered is the 1 in 100 PML event. FCT has more freedom to test an insurers exposure and financial strength to withstand a catastrophe event as they can test one severe event, multiple small events, both small and large events over a varying return period (not restricted to 1 in 100 for the first event).
I believe you mean the *second catastrophe event is a 1 in 100 PML event. But otherwise that seems like an acceptable answer
I though the process was to simulate the natural catastrophe stress test to stress the insurers balance sheet from the first catastrophe event and then add the catastrophe component from the standard BCAR score afterwards which would make the 1 in 100 PML event the first catastrophe event and the standard cat component of BCAR the second event. Could you clarify where my understanding is wrong?
There is already a catastrophe component in the standard BCAR score. This is calculated first. We then test the impact of a 1 in 100 PML event after. So the order is standard BCAR score -> 1 in 100 PML event