RBC charge for reinsurance recoverables is what factor applied to reinsurance recoverable?

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Multiple Choice

RBC charge for reinsurance recoverables is what factor applied to reinsurance recoverable?

When calculating RBC, charges are put on certain asset items to capture the risk of loss. For amounts expected to be recovered from reinsurers (reinsurance recoverables), there is a credit risk charge that reflects the possibility a reinsurer may default or delay payment. This charge is applied as a percentage of the recoverables, serving as a cushion against counterparty risk. The standard factor used is 0.10, so 10% of the reinsurance recoverables is added to RBC. This level balances prudence with practicality, recognizing that recoverables aren’t risk-free. Smaller or larger factors would understate or overstate the risk, respectively, so 0.10 is the conventional choice.

When calculating RBC, charges are put on certain asset items to capture the risk of loss. For amounts expected to be recovered from reinsurers (reinsurance recoverables), there is a credit risk charge that reflects the possibility a reinsurer may default or delay payment. This charge is applied as a percentage of the recoverables, serving as a cushion against counterparty risk. The standard factor used is 0.10, so 10% of the reinsurance recoverables is added to RBC. This level balances prudence with practicality, recognizing that recoverables aren’t risk-free. Smaller or larger factors would understate or overstate the risk, respectively, so 0.10 is the conventional choice.

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