General insurance The financial capacity of insurance companies to accept risks

[Phabbyfundz]

Capacity of insurance company is the supply of insurance available to meet demand. Capacity depends on the industry's financial ability to accept risks. For an individual insurer, the maximum amount of risks it can underwrite based on its financial conditions.
The adequacy of an insurer capital relative to its exposure to loss is an important measure of solvency. A property or casualty insurer must maintain a certain level of capital and policy holder surplus to underwrite risks. This capital known as capacity.
When the industry is hit by high losses such as after the world trade center terrorist attack, capacity is diminished. It can be restored by increase in net income, favorable investment returns, reinsuring more risks and or rising additional capital.

 

[btaliat]

Insurance companies like other financial institutions do also consider their capacity before they decide to go into insuring the risks of other people. For instance, it is not all insurance companies that always go into some insurance agreement. For example, some insurance companies don't go into marine insurance because of their low capacity.

 

[Chibson]

Before any insurance company will begin operations they will firstly look at their financial capacity. They also calculate their risks and know their potential gains of going into such a business. Insurance is a risky business because you may pay millions to an insurer because of the agreement reached between the both of you. So looking at your financial capability is essential.

 

[Wisdom01]

You are right on this insurance companies cant go for what they know they won't be able to cover the risk they are actually not really worth coverage or does not match with their financial capabilities ,they don't want to be in big debt trying to cover the risk involved I think

 

[Mandy96]

The financial capacities of various insurance companies depends on their standard. I mean there are different organizations doing this business but their capital is much more than each other. One has to be careful with which insurer you will trust your investment in. Some could even go bankrupt if proper care is not taken