It normally means something like, "When an insurance company's assets are lower than its liabilities", but you then need to define both of these terms. For example, in reporting to our regulator, the FSA, we normally use a prudent measure of liabiities (and a slightly prudent measure of assets). So it's possible for assets to be less than liabilities using these prudent measures, but still to exceed liabilities on a more realistic measure.
There are other measures you can use, each of which contains more or less prudence. The real problem is that you might not know whether you can meet all your liabilities until the last policy has gone off the books - and by then, it might be too late.
I'll try to put together something more formal ...
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Re: A question for you...
Date: 2009-10-07 11:19 am (UTC)There are other measures you can use, each of which contains more or less prudence. The real problem is that you might not know whether you can meet all your liabilities until the last policy has gone off the books - and by then, it might be too late.
I'll try to put together something more formal ...