CAS Exam 6C Fall 2015, Question 11
Study guide: Exam 6C
The following information is available for a property and casualty insurance company and its reinsurance contract as at December 31, 2014:
- Estimated undiscounted value of the liabilities to be commuted: $2,000,000
- Calendar year payment pattern (payments assumed to be made mid-year):
| Calendar year | Payment pattern |
|---|---|
| 2015 | 10% |
| 2016 | 30% |
| 2017 | 75% |
| 2018 | 100% |
- Risk free rate: 1%
- Required margin: 10%
- Target capital to required capital ratio: 2.5
- Risk cost of capital: 8%
Calculate the commuted value of claims as at December 31, 2014.
Part a (3 points)
Answer this question and see the worked solution