General insurance What is solvency in insurance

[Phabbyfundz]

To understand vividly insurance companies and insurance policy there are some terms we need to be conversant with and one of them is solvency.
Solvency is the insurance company or insurers ability to pay the claims of policy holder. Regulations to promote solvency includes minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investments and cooperate activities, financial ratio tests and financial data disclosure.
Insolvency is the insurers in ability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When the regulators deem an insurance company is in danger of becoming insolvent they can take one of these three actions; place the company in conservatorship or rehabilitation if the company can be saved or in liquidation if salvage is deemed impossible.

 

[Nite]

The solvency of an insurance company is the size of its capital relative to all risks it has taken. With high solvency ratio, a company has adequate funds for managing its financial obligations. Generally, a high solvency ratio is viewed as a sign of trustworthiness. Conversely, with a low solvency, a company may find difficulty in managing its financial obligations and default payments.

 

[btaliat]

An instance company with high solvency ratio will automatically see many customers and enjoy too much trust worthy because many people will believe in it and its service since it will be able to pay the insured person as and when due compare to when am insurance company is insolvent

 

[Wisdom01]

I think most times the insurance company could merge with other companies just to help in eliminating solvency and most times they could borrow from banks and other important organization then to solve their debt problem and resolve or repay to the bank after carrying out the lending I think

 

[Chibson]

definitely before you sign any agreement with an insurance company you should know your financial capability and the income level. Insurance companies also look at their financial capability before reaching an agreement with an insurer.
A lot of problems may erupt if an insurance company refuses to pay or compensate an insurer when there are damages, and such should be avoided.

 

[Mandy96]

Well it is great to know about this and what it does. Knowing the stance and the risk of the policy of which you purchased is something that makes it very vital for the insured. These are part of the things that should be known by the client before buying the plan