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Assume Storrs Insurance Company (a Property Casualty company) has the following data for


  • Total Assets = $90M
  • Fixed Income assets = $60M
  • Equity assets = $20M
  • Total liabilities= $75M
  • Loss Reserves = $45M
  • Unearned premium reserves = $25M
  • Premiums for calendar year 2016 = $30M

Assume that for RBC purposes:

  • R0 = 0
  • R1 factor for its blend of fixed income assets =   5%
  • R2 factor for equity assets=  20%
  • R3=0
  • R4 factor for underwriting risk, loss reserves = 15%, Unearned Premium reserves = 10%
  • R5 factor for underwriting risk, premiums= 30%

  1. What is the Authorized Control Level (ACL) for Storrs for year-end 2016?
  2. What is Total Capital at 12/31/16?
  3. What is the RBC Ratio?  
  4. What do RBC rules then require of the company? Of the state insurance commissioner?

Assume that a second company Mansfield Insurance Company, is absolutely identical in all respects, except that it has a more conservative actuary, who has decided to set the loss reserves at $54M rather than $45M.

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