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The level of an insurance company's spare capital in excess of its projected liabilities, effectively a measure of its financial health. There are often statutory minimum solvency margins, which are sometimes known as the resilience test. In a bear market insurance companies may face problems maintaining their solvency margins because their equity investments are falling in value. Also known as solvency ratio.
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solvency ratio UK US noun [C]
► ACCOUNTING, FINANCE a measurement of whether a company has enough money to pay its debts: »
The key measure of any building society's strength is its solvency ratio.
► INSURANCE the amount of capital that an insurance company has in relation to probable claims (= money paid to those who have bought insurance): »
A spokesman for the FSA refused to comment on whether these insurers had been forced to act in order to maintain solvency ratios.
Financial and business terms. 2012.