Solvency adequacy ratio = actual capital of insurance company/minimum capital The actual capital of an insurance company refers to the difference between recognized assets and recognized liabilities.
The minimum capital of an insurance company refers to the amount of capital that an insurance company should have in order to absorb the adverse effects of asset risk, underwriting risk and other related risks on its solvency according to the requirements of regulatory agencies. Simply put, it is the recognition of assets divided by the recognition of responsibilities.
Extended data solvency adequacy ratio = actual capital/minimum capital of insurance company
The actual capital of an insurance company refers to the difference between authorized assets and authorized liabilities.
The minimum capital of an insurance company refers to the amount of capital that an insurance company should have in order to absorb the adverse effects of asset risk, underwriting risk and other related risks on its solvency according to the requirements of regulatory agencies.
For an insurance company whose solvency adequacy ratio is less than 100%, the China CIRC may list the company as a key regulatory object and take the following regulatory measures according to the specific circumstances:
(1) For a company whose solvency adequacy ratio exceeds 70%, the China Insurance Regulatory Commission may require the company to propose a rectification plan to reach the minimum solvency within a time limit. If the minimum solvency limit is not reached, necessary regulatory measures can be taken, such as requiring capital increase, ordering reinsurance, limiting business scope, limiting dividends to shareholders, limiting the purchase of fixed assets, limiting the scale of operating expenses, and limiting the establishment of branches, until the minimum solvency limit is reached.
(II) For companies with solvency adequacy ratio between 30% and 70%, China CIRC may, in addition to the measures listed in the preceding paragraph, order the company to auction off non-performing assets, order the transfer of insurance business, limit the salary level and on-the-job consumption level of senior managers, restrict the company's commercial advertisements, order the company to stop developing new business and other measures deemed necessary by China CIRC.
(3) For companies whose solvency adequacy ratio is less than 30%, in addition to the measures listed in the preceding two paragraphs, the China Insurance Regulatory Commission may also take over insurance companies in accordance with the provisions of the Insurance Law.
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