Solvency Margins

Solvency margins are the financial buffers that insurance companies must maintain to ensure they can meet their future claims and obligations. Think of it as a safety net; it shows the company's ability to absorb unexpected losses and remain financially stable. Regulatory authorities require these margins to protect policyholders and ensure the company’s long-term viability. Essentially, if an insurance firm’s assets are significantly more than its liabilities, the solvency margin is high, indicating a strong financial position. This helps maintain trust and confidence in the insurance system.