CAS Exam 6C Spring 2017, Question 23

Study guide: Exam 6C

Part a (0.5 points)

Briefly describe two scenarios that would lead to an increase in capital charges for investment risk in A.M. Best's net required capital calculation.

Part b (1 point)

Identify and briefly describe the two risk categories other than investment risk used in A.M. Best's net required capital calculation.

Part c (0.5 points)

Describe the purpose of the "square root rule" used in A.M. Best's BCAR formula.

Part d (0.25 points)

Describe the purpose of A.M. Best's natural catastrophe stress testing.

Part e (1 point)

Given the following information, explain which company is more likely to have A.M. Best allow its stress-tested BCAR score to fall below the BCAR guidelines.

	Company A	Company B
Company Profile	Mutual insurance company	Publicly traded insurance company
Line of Business	Commercial Property	Personal Auto, Personal Property, Commercial Auto and Commercial Property
Primary Cat Exposure	Hail	Earthquake

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