https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AOwn_funds 2026-06-14T12:14:52Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Own_funds&diff=11519&oldid=prev 2026-03-12T00:12:27Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>🏦 &#039;&#039;&#039;Own funds&#039;&#039;&#039; represent the total financial resources available to an [[Definition:Insurance carrier | insurance company]] to absorb losses and meet [[Definition:Policyholder | policyholder]] obligations, as defined under [[Definition:Solvency II | Solvency II]] and similar risk-based [[Definition:Capital adequacy | capital adequacy]] frameworks. In insurance regulatory parlance, own funds are the excess of assets over liabilities, adjusted for quality and availability, and they serve as the primary measure of an insurer&#039;s capacity to withstand adverse scenarios. The concept is analogous to equity in general corporate finance but is subject to insurance-specific tiering rules that classify capital items based on their permanence and loss-absorbing characteristics.<br /> <br /> 📐 Under Solvency II, own funds are divided into three tiers. Tier 1 — the highest quality — includes fully paid-up ordinary share capital, retained earnings, and certain [[Definition:Subordinated debt | subordinated liabilities]] that are perpetual and deeply subordinated. Tier 2 encompasses callable subordinated debt and other instruments with fixed maturity dates, while Tier 3 captures items like [[Definition:Deferred tax asset | deferred tax assets]] that have the weakest loss-absorption capacity. Regulators impose strict limits on how much Tier 2 and Tier 3 capital can count toward meeting the [[Definition:Solvency capital requirement (SCR) | solvency capital requirement]] and the [[Definition:Minimum capital requirement (MCR) | minimum capital requirement]]. Insurers must perform an [[Definition:Own risk and solvency assessment (ORSA) | own risk and solvency assessment]] to demonstrate that their own funds are sufficient not just today but under projected stress conditions.<br /> <br /> 🔑 The composition and adequacy of own funds shape nearly every strategic decision an insurer makes — from how aggressively it can write [[Definition:Premium | premium]] to whether it can pursue acquisitions or return capital to [[Definition:Shareholder | shareholders]]. [[Definition:Rating agency | Rating agencies]] evaluate own funds quality alongside regulatory ratios when assigning [[Definition:Financial strength rating | financial strength ratings]], and a downgrade driven by thin capitalization can trigger [[Definition:Reinsurance | reinsurance]] contract provisions or distribution partner reviews. For [[Definition:Lloyd&#039;s syndicate | Lloyd&#039;s syndicates]] and mutual insurers, the pathway to building own funds differs from stock companies, often relying on accumulated surpluses or [[Definition:Funds at Lloyd&#039;s (FAL) | Funds at Lloyd&#039;s]] structures rather than equity issuance.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Solvency II]]<br /> * [[Definition:Solvency capital requirement (SCR)]]<br /> * [[Definition:Minimum capital requirement (MCR)]]<br /> * [[Definition:Own risk and solvency assessment (ORSA)]]<br /> * [[Definition:Surplus]]<br /> * [[Definition:Risk-based capital (RBC)]]<br /> {{Div col end}}</div>

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