Unless you have been hiding underneath a rock the last year or so you might have heard mentioned a term called Risk Based Capital Levels or Standards. Risk Based Capital Standards are standards for minimum capital for a life insurance company recommended by the NAIC. The standards will and do vary for the life companies, depending on how much insurance they may have in force and the investment risk assumed by the companies.
The NAIC is now requiring that the annual statement submitted by the life insurance companies provide data necessary for risk based capital evaluation.
Here is another definition with a video explaining risk based capital…
Amount of required capital that the insurance company must maintain based on the inherent risks in the insurer’s operations. These risks include Asset Depreciation Risk, Credit Receivables Risk, Underwriting Risk and Off-Balance-Sheet Risk .
Visit the site to watch the video, had issues trying to get it loaded and hope you enjoyed the information.