Archive for September, 2011

Possible Topic Combinations in Exam

September 11th, 2011

Reminder: there may be older blog postings that do not appear in the “recent posts” section

I mentioned at the Live Seminar that it is becoming more and more likely that the CAS will try to combine material from different papers in some exam questions. Some examples of topics that may be combined include:

Schedule F & RBC
Schedule F & Notes
Schedule F & SAO

Schedule P & SAO
Schedule P & Notes
Schedule P & IRIS

Notes & SAO


Surplus & IASA10
Surplus & IASA14/ Blanchard
Surplus & IASA2
Surplus & IASA5

SSAP9 & Notes

IASA2 & Blanchard/ IASA14

RBC & Vaughan
RBC & Surplus


Blanchard/ IASA14 & Defrain


Note these are just examples… there may be other combinations that the writers come up with.


Subsidiary RBC Allocation

September 7th, 2011

Reminder: there may be older blog postings that do not appear in the “recent posts” section

A lot of people have been asking about how to allocate the RBC from subsidiaries to R0, R1 etc:
-as you probably know, the RBC from insurance subsidiaries goes to R0
-also, the RBC allocation from investment subsidiaries depends on the investments of the subsidiary (we will allocate to R1 or R2 depending on if it is a debt or equity investment). In addition, these investments should be included in the parent’s bond concentration charge and asset concentration factor calculations
-non insurance subsidiaries: this is the tricky one. It depends on how the insurer has invested in the subsidiary. If it is an equity investment (the more likely option), we should include in R2. If the insurer owns bonds, include in R1. If the question doesn’t mention, I’d assume equity and answer accordingly


Outstanding Questions from the Live Seminar

September 5th, 2011

A quick note before I start… a lot of people seem to be missing some of the earlier blogs (particularly when I post several blogs in a week). Please make sure that you have read ALL blog posts:


I had promised to get back to some people about certain questions asked during the seminar.

Q. What type of incurred losses are included in the numerator of Ratio 5?
A. CY Inc Losses & LAE from the Income Statement

IRS Discounting
Q. Is the Schedule P that is used to derive the discount rate for an accident year fixed (or in other words, is the loss payment pattern for a given AY fixed)?
A. Yes: pg 8 of the text mentions that you should use the schedule that was available before the start of the AY

Q. How is Claims Made business treated in Part 1?
A. This isn’t explicitly covered in the text, so I doubt that it is testable. That being said, I believe it is grouped by Claims Made year (as opposed to AY)

Q. Why do we include the discounting adjustment AND give credit for tabular discounts when calculating the RBC reserving charge?
A. I don’t have a great answer here. It’s possible that there is a small degree of double discounting

Q. What is the specific formula to calculate the “adverse development formula” for the reserving risk?
A. Please see the note in the errata.

Note, please send me an email if I did not address a question that you had asked (I misplaced one of my note pages, so that is very possible).