What does Capital Adequacy mean? Read on to discover the definition & meaning of the term Capital Adequacy - to help you better understand the language used in insurance policies.

Capital Adequacy

Refers to the funding required of a risk financing vehicle, such as a captive insurance company, to meet the liabilities insured. With regard to enterprise risk management (ERM), the term refers to the amount of capital needed to satisfy a specified economic capital constraint (e.g., a certain probability of ruin), usually calculated at the enterprise level.

We hope the you have a better understanding of the meaning of Capital Adequacy.

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