What does Risk Based Capital mean? Read on to discover the definition & meaning of the term Risk Based Capital - to help you better understand the language used in insurance policies.
Risk Based Capital
Risk-based capital is a certain amount of capital that insurance companies must have on hand in order to hedge against their risks. This capital is there to make sure that the company can maintain solvency, and can fulfill all of its financial operating needs. The NAIC developed the requirements for risk based capital for insurance companies.
We hope the you have a better understanding of the meaning of Risk Based Capital.