Insurance actuaries help companies assess risk, then use that analysis to help design and price insurance policies. The higher the risk for a certain group, the more likely it is that the insurance company will have to pay out a claim. As a result, those groups must pay higher insurance rates.
In the insurance context an actuarial reserve is the present value of the future cash flows of an insurance policy and the total liability of the insurer is the sum of the actuarial reserves for every individual policy. Regulated insurers are required to keep offsetting assets to pay off this future liability.
Definition: Insurance contracts that do not come under the ambit of life insurance are called general insurance. The different forms of general insurance are fire, marine, motor, accident and other miscellaneous non-life insurance. Like life insurance, general insurance products come at a price in the form of premium.
In general, insurance works by spreading the cost of unexpected risks among a large number of people in the same region who share similar risks. When you take out an insurance policy, you pay a monthly or annual premium. General insurance does not include health or life insurance.
Solvency II is a Directive in European Union law that codifies and harmonises the EU insurance regulation. Primarily this concerns the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.
Financial capital most commonly refers to assets needed by a company to provide goods or services, as measured in terms of money value. Economic capital is the estimated amount of money needed to cover possible losses from unexpected risk.
1. Assets used to produce goods. Farm land is a major example of real capital: the farmer uses this asset to produce commodities, which he then sells to make a profit. Real capital is part of the calculation of an individual's or company's net worth.
Financial (Economic) CapitalCommon types of debt capital are: bank loans. personal loans. overdraft agreements.
Risk-weighted assets are calculated by looking at a bank's loans, evaluating the risk and then assigning a weight. When measuring credit exposures, adjustments are made to the value of assets listed on a lender's balance sheet. All of the loans the bank has issued are weighted based on their degree of credit risk.
Capital can be held through financial assets or raised from debt or equity financing. Businesses will typically focus on three types of business capital: working capital, equity capital, and debt capital. In general, business capital is a core part of running a business and financing capital intensive assets.
The capital adequacy ratio (CAR) is a measure of how much capital a bank has available, reported as a percentage of a bank's risk-weighted credit exposures. The purpose is to establish that banks have enough capital on reserve to handle a certain amount of losses, before being at risk for becoming insolvent.
Factors of production are the resources people use to produce goods and services; they are the building blocks of the economy. Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.
Risk-adjusted capital ratio is used to gauge a financial institution's ability to continue functioning in the event of an economic downturn. It is calculated by dividing a financial institution's total adjusted capital by its risk-weighted assets (RWA).
A capital requirement (also known as regulatory capital or capital adequacy) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets.
Capital requirements are regulatory standards for banks that determine how much liquid capital (easily sold assets) they must keep on hand, concerning their overall holdings. Express as a ratio the capital requirements are based on the weighted risk of the banks' different assets.
To lessen the probability of failure, banks must maintain a minimum of capital, called regulatory capital, because the amount that must be maintained, which varies according to the riskiness of the assets, is stipulated by law.
Risk capital refers to funds allocated to speculative activity and used for high-risk, high-reward investments. In the context of venture capital, risk capital may also refer to funds invested in a promising, but unproven, startup.
Economic capital simply refers to economic resources, such as cash and property. Social capital refers to the resources and advantages we get from the groups we belong to and the people we know.
Terms in this set (16)Capital. The money and wealth needed in order to produce goods and services.
Economic capital Economic capital refers to material assets that are 'immediately and directly convertible into money and may be institutionalized in the form of property rights' (Bourdieu 1986: 242).
Social capital refers to social connections (e.g., made through employment or clubs) and cultural capital refers to knowledge and academic credentials (institutionalized cultural capital), cultural possessions such as art (objectified cultural capital), and ways of speaking or manner, shown through posture or gestures
Capital includes the cash and other financial assets held by an individual or business, and is the total of all financial resources used to leverage growth and build financial stability.
Social capital is defined by the OECD as “networks together with. shared norms, values and understandings that facilitate co-operation within or among groups”. In this definition, we can think of networks as real-world links between groups or individuals.
