MCT Problem 3 - Incorrect Answer
Problem 3 for Unregistered Reinsurance is incorrect.
Technically this question is done at Step 3a. The amount in 3a is the answer for deduction on Capital Available due to Unregistered Reinsurance.
Step 3b is calculating the margin for registered Reinsurance which is different from the deduction in step 3a.
Also for step 3B is incorrect even if its for the Margin. its missing the deduction of 730, the final margin should be 3,324.
Please see my screenshot below.
Comments
Hi, I still don't quite get this question. From the source:
Could this be translated into:
If (A+B+C)-(D+E+F+G+H) is positive, then apply deduction to capital available
where deduction is (A+B+C)-(D+E+F+G+H)
If (A+B+C)-(D+E+F+G+H) is negative, then apply deduction to capital required
where deduction is (D+E+F+G+H)-(A+B+C)
The deduction wouldn't affect how we calculate margin required for unregistered reinsurance, where
Margin = 20% x (A+B+C-D)
Why are you trying to apply the formula for a deduction to capital available to the margin required for unregistered reinsurance?
I just think the formula and the answer in the new excel posted in this thread is not consistent:
I believe the answer key is trying to say:
deduction for capital available = (A+B+C) - (D+E+F+G+H) = 7051
Nope, you are looking at the excel for section 4.3.3.3 for section 4.3.3.2. The excel file for section 4.3.3.2 is correct
Step 3a is 4.3.3.2 which is entirely different concept from the Formula Un-ded.
Step 3b is 4.3.3.3
Please help double check, something is off there.
Both Excel files are fine. As I mentioned above, you are looking at the wrong Excel. Capital required and Capital Available are not the same thing
I think the issue is in original MCT Sample question 3. It asks for deduction from capital available but calculates deduction from capital required in the answer key.
From the excel practice problems section:
I see what you mean yeah. I'll fix the typo