Solvency

Narrowly defined as the ability of an insurer to meet its obligations (liabilities) at any time. In order to set a practicable definition, it is necessary to clarify the type of claims covered by the assets, e.g., already written business (run-off basis, break-up basis), or would future new business (going-concern basis) also to be considered. In addition, questions regarding the volume and the nature of an insurance company's business, the appropriate time horizon to be adopted, and setting an acceptable probability of becoming insolvent are taken into consideration in assessing a company's solvency.