CAS Exam 6C Fall 2019, Question 24
Study guide: Exam 6C
The following information is available for a property and casualty insurance company as at December 31, 2018. All amounts are in thousands of dollars ($000s).
| Item | Amount |
|---|---|
| Capital Available | 250,000 |
| Capital Required | |
| Fixed income securities | 20,000 |
| Credit | 12,500 |
| Potential catastrophe losses | 15,000 |
| Equity securities | 30,000 |
| Reserves | 75,000 |
| Business risk | 7,000 |
| Interest rate | 10,000 |
| Premiums | 65,000 |
Part a (1 point)
Calculate Best's Capital Adequacy Ratio (BCAR).
Part b (0.25 points)
Briefly describe why A.M. Best uses a covariance adjustment in the BCAR formula.
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