(1) solvency ratio
The solvency ratio for insurance companies is a measure of the ability to meet their financial obligations and remain financially stable overtime. Simply the solvency ratio looks at the amount of capital or assets that an insurance company has compared to its liabilities or debts. IRDAI requires all investors to maintain minimum excess assets over liabilities which is referred to as the required solvency ratio of 150%.
A low solvency ratio indicates that the company may not have enough resources to meet its obligations in the long term ,leading to insolvency and financial failure. While a high solvency ratio suggests that the company is financially stable and has the capacity to pay out claims over the long term