SOLVENCY MARGIN AND COMPLIANCE


Like commercial establishments, the insurance companies also have to ensure that the value of their assets is not less than the value of their liabilities It was stipulated that the value of the assets, after distribution of surplus, should exceed the value of the liabilities by a certain margin. This margin is known as the solvency margin. The solvency margin ance company can be said to be the ability of the company to pay the claims.(Solvency margin is the excess of the assets of the company over its liabilities. It is like the capital adequacy requirements of the banks. It is also defined as the excess capital over the projected liabilities. Solvency margin decides the financial health of the insurance company Hence, the regulators stipulate the minimum solvency margin for the insurer.

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