Report 1: Overview of Dependencies and Calibration in the RBC Formula

At the request of the American Academy of Actuaries, the CAS formed the Risk Based Capital (RBC) Dependencies and Calibration Working Party (DCWP) to research how to handle dependencies and calibration in the NAIC P&C RBC formula (RBC or RBC formula), including the extent to which risk diversification should be reflected in the P&C formula. The research identified a number of gaps in the current RBC formula. This paper presents results of the DCWP’s work to date. DCWP research will continue and the results will be presented in a series of reports.

Keywords: Risk-Based Capital, Solvency, Capital Requirements, Insurance Company Financial Condition, Internal Risk Models, Solvency Analysis, Analyzing/Quantifying Risks, Assess/Prioritizing Risks, Integrating Risks.