Risk-Based Capital (RBC) Premium Risk Charges Improvements to Current Calibration Method

Submitted on 29th July 2015

The purpose of this paper is to describe the results of research on methods to improve the Current Calibration Method (CCM) for premium risk charges for use in the NAIC RBC Formula. The paper shows how it is possible to construct risk charges that might be both more reflective of underlying risk and more stable over time than the CCM. This paper shows the extent to which calibration of premium risk charges is affected by issues identified, but not measured, in prior research premium size by line of business (LOB-size), pooling, and movement over time. The paper also identifies and measures the extent to which risk charges are affected by the following additional issues: (a) the minor line effect, which appears to distort risk charges for specialty lines of business (LOBs), (b) the effect of data maturity, and (c) the effect of survivorship, companies that stop filing annual statements.

Casualty Actuarial Society
Length of Resource
83 pages
CAS Risk-Based Capital (RBC) Research Working Parties
Date Published
Publication Type
Resource Type