According to the rules and regulations of a country, every insurer is required to obtain a certificate of registration. The registration is required to be renewed and a minimum paid-up capital is required.
Every insurer is required to deposit a certain percentage of total gross premium with the federal bank of the country, in approved cash or securities. Insurers are required to invest assets only in investments approved by the insurance regulatory authority.
The determination of the value of assets and liabilities also are stipulated by the regulatory authorities. Solvency margin determine the extent to which the assets are to exceed the liabilities.
The insurer has to adhere to the provisions of the minimum required solvency ratio. This ensures that their solvency is adequate and hence their interests and the interests of the customers are kept in tact.
Every insurer is required to deposit a certain percentage of total gross premium with the federal bank of the country, in approved cash or securities. Insurers are required to invest assets only in investments approved by the insurance regulatory authority.
The determination of the value of assets and liabilities also are stipulated by the regulatory authorities. Solvency margin determine the extent to which the assets are to exceed the liabilities.
- It could be expressed as a lump sum eg: Assets should be $300 crores more than liabilities.
- It could be expressed as a percentage: eg: Assets should be 150% of liabilities.
The insurer has to adhere to the provisions of the minimum required solvency ratio. This ensures that their solvency is adequate and hence their interests and the interests of the customers are kept in tact.
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