Definition
The solvency ratio measures an insurer’s ability to meet its long-term financial obligations. It is typically calculated by comparing the insurer’s statutory capital and surplus to its total liabilities or risk-weighted assets.
Why it matters (in Poovi’s context)
A high solvency ratio indicates financial strength and stability, reassuring policyholders and regulators.
Key properties or components
- Capital Adequacy
- Financial Strength
- Risk Assessment
- Regulatory Compliance
Contradictions or debates
While a high ratio is generally positive, extremely high ratios might suggest inefficient use of capital that could be deployed for growth or investment.