Risk Based Capital (RBC) Ratio

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Risk Based Capital (RBC) Ratio Ratio used to identify insurance companies that are poorly capitalized. Calculated by dividing the company's capital by the minimum amount of capital regulatory authorities have deemed necessary to support the insurance operations. For example, a company with a 200% RBC ratio has capital equal to twice its risk based capital. Risk-based capital requirement refers to a rule that establishes minimum regulatory capital for financial institutions. RBC is based on two factors: 1) an insurance company's size; and 2) the inherent riskiness of its financial assets and operations. That is, the company must hold capital in proportion to its risk. Risk-based capital requirements exist to protect financial firms, their investors, their clients, and the economy as a whole. These requirements ensure that each financial institution has enough capital on hand to sustain operating losses while maintaining a safe and efficient market. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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