Which are sources of the R3 charge?

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Multiple Choice

Which are sources of the R3 charge?

R3 captures the credit risk component of an insurer’s asset exposures that aren’t cash or marketable investments. The sources that feed into this charge are items where a counterparty could default and the insurer would suffer a loss. Non-invested assets include receivables and other assets that arise from operations and can be impaired if counterparties don’t pay or can’t settle. Reinsurance recoverables are amounts the insurer expects to receive from reinsurers, and those amounts carry credit risk if a reinsurer defaults or delays payment. Health credit risk reflects the specific credit exposure tied to health-related liabilities and the ability to fund those obligations. Cash and cash equivalents are typically treated separately and carry very low credit risk, and market risk or investment income relate more to the asset side of investments rather than the specific credit-risk charge sources addressed by R3. Therefore, the combination of non-invested assets, reinsurance recoverables, and health credit risk best represents the sources of the R3 charge.

R3 captures the credit risk component of an insurer’s asset exposures that aren’t cash or marketable investments. The sources that feed into this charge are items where a counterparty could default and the insurer would suffer a loss. Non-invested assets include receivables and other assets that arise from operations and can be impaired if counterparties don’t pay or can’t settle. Reinsurance recoverables are amounts the insurer expects to receive from reinsurers, and those amounts carry credit risk if a reinsurer defaults or delays payment. Health credit risk reflects the specific credit exposure tied to health-related liabilities and the ability to fund those obligations.

Cash and cash equivalents are typically treated separately and carry very low credit risk, and market risk or investment income relate more to the asset side of investments rather than the specific credit-risk charge sources addressed by R3. Therefore, the combination of non-invested assets, reinsurance recoverables, and health credit risk best represents the sources of the R3 charge.

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