Exam 6C Practice Question 20
Study guide: Exam 6C
An analyst who has worked only with OSFI's Life Insurance Capital Adequacy Test (LICAT) reviews a federally regulated P&C insurer:
- Capital available: 300
- Sum of the MCT capital requirements at the target level for insurance, market, credit and operational risk, less the diversification credit: 330
Treating the 330 the way LICAT treats its Base Solvency Buffer, the analyst divides 300 by 330, gets 91%, and concludes the insurer is below OSFI's minimum.
Which assessment is correct?
- A) The MCT ratio is 136%: above the 100% minimum, but below the 150% supervisory target
- B) The MCT ratio is 136%: above the supervisory target, which is the same 100% as LICAT's
- C) The MCT ratio is 91%: below the 100% minimum, as the analyst concluded
- D) The MCT ratio is 91%: above the 90% minimum that LICAT applies to its Total Ratio
- E) The MCT ratio is 205%: comfortably above the 150% supervisory target
Answer this question and see the worked solution