Newsletter
INSURERS'’ MINIMUM CAPITAL ADEQUACY RATIO PROVISIONALLY SET AT 200%
To promote the stable operation of the insurance industry, at the end of this year, the Ministry of Finance (MOF) intends to apply a minimum capital adequacy ratio system of insurance companies, which will require them to maintain their ratio of capital to risk capital-also known as the risk based capital (RBC) ratio-above a certain minimum.
After preliminary deliberations, the MOF intends to set insurance companies' minimum ratio of capital to risk capital at 200%. Insurers who do not meet this condition will be required to adjust their assets or to arrange to increase their capitalization by a cash injection. Insurers with relatively large investments in equity and real estate will be most affected, as the greater the value of the policies underwritten by them or of their investments in risky assets such as equity and real estate, the greater the capitalization they will need in order to comply with the RBC ratio requirement.