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Define solvency margin

The solvency margin is a measure of an insurance company's financial health and ability to pay claims. It represents the excess of an insurer's assets over its liabilities, and is typically expressed as a percentage of the insurer's total liabilities. Formula The solvency margin can be calculated using the following formula: Solvency Margin = (Total Assets - Total Liabilities) / Total Liabilities Components The solvency margin consists of two main components: 1. * Available Solvency Margin *: This represents the excess of an insurer's assets over its liabilities, and is typically calculated based on the insurer's financial statements. 2. * Required Solvency Margin *: This represents the minimum amount of capital that an insurer is required to hold in order to meet its regulatory obligations. Importance The solvency margin is an important indicator of an insurance company's financial stability and ability to pay claims. A higher solvency margin indicates that an ...