R0 charge for bond investments in Insurance Subsidiaries is calculated as which expression?

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Multiple Choice

R0 charge for bond investments in Insurance Subsidiaries is calculated as which expression?

The amount charged to bond investments in Insurance Subsidiaries is determined by comparing two things and taking the smaller one: the pro rata share of new excess RBC allocated to that subsidiary, and the asset’s carrying value (book value, or adjusted carrying value if applicable) of the bonds. The pro rata share represents how much of the newly available RBC the subsidiary is entitled to based on its ownership of the bonds. The carrying value reflects how much the bonds are currently worth on the books. The minimum of these two ensures you don’t overstate the charge—you can only allocate up to what the bonds are worth, and you can only allocate up to what the new excess RBC actually supports. So, the correct expression is the minimum of pro rata share of new excess RBC and the book/adjusted carrying value of the bonds. The other options mix the wrong RBC basis or use the wrong measure (old excess, face value, or a maximum).

The amount charged to bond investments in Insurance Subsidiaries is determined by comparing two things and taking the smaller one: the pro rata share of new excess RBC allocated to that subsidiary, and the asset’s carrying value (book value, or adjusted carrying value if applicable) of the bonds. The pro rata share represents how much of the newly available RBC the subsidiary is entitled to based on its ownership of the bonds. The carrying value reflects how much the bonds are currently worth on the books. The minimum of these two ensures you don’t overstate the charge—you can only allocate up to what the bonds are worth, and you can only allocate up to what the new excess RBC actually supports.

So, the correct expression is the minimum of pro rata share of new excess RBC and the book/adjusted carrying value of the bonds. The other options mix the wrong RBC basis or use the wrong measure (old excess, face value, or a maximum).

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