RBC charge under market valuation approach is calculated as which expression?

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Multiple Choice

RBC charge under market valuation approach is calculated as which expression?

The key idea is how the market valuation approach converts a subsidiary’s risk into a charge on the parent, using a cap that reflects available resources and then scaling by ownership. You take the smaller of two quantities: the affiliate’s own RBC (the capital required to cover the affiliate’s risks) and the statutory surplus (the resources actually available to absorb losses). This cap ensures the charge isn’t larger than what could realistically be supported by the affiliate’s resources. Then you multiply that base by the parent’s ownership percentage to allocate the parent’s share of the affiliate’s risk. So the RBC charge is the product of ownership and the minimum of affiliate RBC and statutory surplus. This aligns the charge with both the subsidiary’s risk and the resources backing it, scaled appropriately for how much of the subsidiary the parent owns.

The key idea is how the market valuation approach converts a subsidiary’s risk into a charge on the parent, using a cap that reflects available resources and then scaling by ownership.

You take the smaller of two quantities: the affiliate’s own RBC (the capital required to cover the affiliate’s risks) and the statutory surplus (the resources actually available to absorb losses). This cap ensures the charge isn’t larger than what could realistically be supported by the affiliate’s resources. Then you multiply that base by the parent’s ownership percentage to allocate the parent’s share of the affiliate’s risk.

So the RBC charge is the product of ownership and the minimum of affiliate RBC and statutory surplus. This aligns the charge with both the subsidiary’s risk and the resources backing it, scaled appropriately for how much of the subsidiary the parent owns.

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