A life insurance company has estimated capital requirements for each of the following risk classes: asset risk-affiliate (C0) = $2 million, asset risk-other (C1) = $5 million, insurance risk (C2) = $4 million, interest rate, credit, market risk (C3) = $1 million, and business risk (C4) = $3 million.
a. What is the required risk-based capital for the life insurance company?
b. If the total surplus and capital held by the company is $11.34 million, does it meet the minimum requirements?
c. How much capital must be raised to meet the minimum requirements?