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.
This is one of several papers being issued by the Risk-Based Capital (RBC) Dependencies and Calibration Working Party.
Keywords: Risk-Based Capital, Capital Requirements, underwriting risk, reserve risk, premium risk, Analyzing/Quantifying Risks, Assess/Prioritizing Risks, Integrating Risks
