MCT Challenge file

Justwanta6Justwanta6
edited September 5 in OSFI.MCT

Hi, 2 questions regarding this file:
1. We were not given any risk factors, I thought we were not required to memorize them, is that still true?
2. For part a, shouldnt we check composition limit using CapAv net regulatory adj net AOCI? i think the solution is using Gross capAv net AOCI..

Comments

  • sdeibertsdeibert

    I have the same two questions as above, for insurance risk the syllabus says we are not responsible for those risk factors, we are only expected to know operational. Additionally, all other questions take into account additions/deductions before setting the limits for B&C, it doesn't end up changing the final answer here since using both methods they do not exceed the limit but clarification on that would be appreciated! Thanks

  • Staff-T1Staff-T1
    1. Risk factors don't need to be memorized, I just did not put them in the file
    2. Yes, it should be on the net capital available. That's an oversight on my end
  • Staff-T1Staff-T1

    The file has been fixed to include the risk factors as well as to check the composition limit using net capital available

  • chris2000911chris2000911
    edited September 26

    Hi,
    I also have one question regarding the ERC component of the Earthquake Margin.
    For the Financial Resources, the reinsurance coverage component is currently calculated as 0.5400 + 0.6250 = 350M.

    I feel like this may not be correct because the MCT paper states that The estimated reinsurance coverage available should be based on reinsurance in force on the day immediately following the end of the financial reporting period and should be equal to an amount of reinsurance collectable for a loss of the size of the PML, net of retention. (Section 4.5.1.2)

    In the challenge question, we were given the Country-Wide PML500 being $450M. I am not sure if my understanding is correct but the amount of reinsurance collectable based on the size of the PML should be (450M-100M)*50% = 175M. For the size of the PML given, it will actually not trigger the second layer of the reinsurance agreement. Any clarification would be appreciated, thank you!

  • Staff-T1Staff-T1

    No you are right, that is an oversight. I have made the fixes are reuploaded a corrected file

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