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Solvency Ratio (definition)

Z

zuglubuglu

Member
The Solvency ratio is defined as "The free reserves divided by the net (of reinsurance) written premiums. "

Isn't this term usually synonymous with the SCR ratio, being {Available Assets}/{Best Estimate Liab + risk margin+ SCR requirement}
 
'Solvency ratio' is a pretty flexible term. I'd always define it in the exam and interpret it accordingly. For example, some say A/L is the solvency ratio too. And then of course it's debatable how you calculate 'free reserves' - for example, I'd say it's A-L, but on what bases?

Comparing the actual solvency with the SCR (or MCR) is the key thing of course, however you define things, and be aware of any simplifications in whatever ratios/bases you choose.
 
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