Old insurance plans from a century or more ago utilized to have at the top, in large letters, the figure of the insurance company's capital stock. That was the way that then existed to make patent prior to the insurance client the solvency of the one who used and administered it. Today, that is not done; however, that does not mean that solvency has vanished. It has just ended up being more requiring, advanced, and conscious of the dangers assumed by insurance companies.
The insurance provider, for example, has to ask itself what losses would produce an unexpected change in the monetary and realty worths in which it has actually invested your money while it is not utilizing it to pay you. How you have to determine the losses that would be triggered by one of the issuers of the properties (such as bonds) that you have acquired not paying you as agreed. Naturally, since, at the time of setting the insurance coverage rate, what the insurance provider is doing is calculating just how much your incidents are going to cost, the insurance provider needs to consider what losses it would trigger if the insurance coverage calculation was incorrect and after that, the premium is insufficient to pay, or unforeseen occasions such as disasters happen.
The insurance company, in other words, needs to consider what losses would cause all these series of adverse events. With official figures, the answer to this question for Spanish insurance is that this set of risks could cause unanticipated losses worth around 24,000 million euros. This figure should have interacted with that of the own funds that the insurer needs to face stated losses. Just how much is this figure? Well, 54.3 billion euros.
The solvency of an insurance provider, today, is computed through a set of extremely complicated formulas that, probably, you do not know; but, nevertheless, they are the best warranty you have that your insurance provider will not only be where you desire it to be today but likewise tomorrow and in 10 or 20 years. The existing solvency system is a risk-based system, which suggests that, for a series of risks or unfavorable occasions set by the legislator, the insurance provider needs to ask itself what losses it would have if such occasions took place.
The consequence is apparent: Spanish insurance coverage has adequate funds to deal with the unanticipated losses it may suffer, and he would still have another as much as what he put in.
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