Could someone help explain the relationship and differences between these: - free assets - free capital - additional capital requirement - solvency capital requirement Thanks!
Hi Amelhypo, Free assets is quite a loose term used to refer to assets not needed to cover liabilities. A definition can also be seen in the glossary. Free capital is referred to the capital available over and above the 'required capital', where 'required capital' could be what the company thinks they need to hold ('economic capital') or it could mean what the regulator says is required ('regulatory capital') Additional capital requirement is the idea that an insurer has to hold capital over and above their view of liabilities. But, do note that their view of liabilities could be best estimate or prudent. Solvency capital requirement is the amount of capital required to be held over and above this best estimate view of liabilities. For the last two, there is a very useful diagram on page 4 of Chapter 36, Capital requirements - i suggest having a thorough read of this chapter, whilst referring back to this post. If you come across any questions where you think the solution isn't quite clear, please do reply with more info below. This way we can take a more targeted look in the context of a question. Thanks Aman ActEd Tutor
