R3

Question 1

R3 covers

Answer 1

Risk that counterparty will default and risk associated with estimating the amounts due

Question 2

R3 generated from

Answer 2

Non-invested assets
Reinsurance recoverable
Health credit risk

Question 3

RBC charge, non-invested assets

Answer 3

0.05 * net admitted value

Question 4

RBC charge, investment income due and accrued

Answer 4

0.01 * net admitted value

Question 5

RBC charge, reinsurance recoverables

Answer 5

0.1 * recoverable (taken from schedule F, reduced by provision for reinsurance); half allocated to R3, half to R4

Question 6

Criticism of 10% charge for reinsurance recoverables

Answer 6

Does not differentiate by reinsurer strength, or whether recoverables have been collateralized