What Does Capital Mean?

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

Capital

Capital

In captive insurance, an all-purpose term having one of three different meanings: the amount initially needed to set up a captive, or the initial amount paid in; the total of this paid-in capital plus other forms of capital, like letters of credit; or the sum of these two plus accumulated surplus. The difference between capital in a captive and other forms of insurance capital is that the owners usually consider it risk capital, ready to be used up by adverse results of the business. This is why one seldom hears about "impairment of capital" in captive financial discussions. Instead, one hears about "reduction in capital."

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

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