The Enduring Significance of Risk-Based Capital in Life Insurance
Understanding Life Insurance Risk-Based Capital Requirements Life insurance companies , like other financial institutions, operate within a framework of regulatory oversight designed to ensure their stability and protect policyholders. A crucial component of this oversight is the implementation of risk-based capital (RBC) requirements. These requirements mandate that insurers hold a certain amount of capital reserves, proportionate to the risks they undertake. Purpose of RBC Requirements The primary objectives of risk-based capital (RBC) requirements are: Financial Stability: To ensure that life insurance companies possess sufficient capital to withstand potential financial shocks and meet their obligations to policyholders. Regulatory Oversight: To provide regulators with a standardized tool for assessing the financial health of insurers and identifying those that may require intervention. Policyholder Protection: To safeguard the interests of policyholders by ...