CAS Exam 6C Spring 2019, Question 17
Study guide: Exam 6C
The following information is available for a property and casualty insurance company as at December 31, 2018.
| Item | Value |
|---|---|
| Risk cost of capital | 10% |
| Risk-free interest rate | 2% |
| Required margin (as a percentage of claims liabilities) | 15% |
| Target capital to required capital ratio | 3.0 |
| Undiscounted value of liabilities to be commuted | $5,000,000 |
Calendar year liability payment pattern:
| Calendar year | Liability payment pattern |
|---|---|
| 2019 | 50% |
| 2020 | 30% |
| 2021 | 20% |
All claim payments are made mid-year.
Calculate the commuted value of claims as at December 31, 2018.
Part a (2 points)
Answer this question and see the worked solution