What does Risk Based Capital Requirements mean? Read on to discover the definition & meaning of the term Risk Based Capital Requirements - to help you better understand the language used in insurance policies.
Risk Based Capital Requirements
A method developed by the National Association of Insurance Commissioners (NAIC) to determine the minimum amount of capital required of an insurer to support its operations and write coverage. The insurer's risk profile (i.e., the amount and classes of business it writes) is used to determine its risk-based capital requirement. Four categories of risk are analyzed in arriving at an insurer's minimum capital requirement: asset, credit, underwriting, and off-balance-sheet.
We hope the you have a better understanding of the meaning of Risk Based Capital Requirements.