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Risk-based capital

The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.

Risk-based capital (RBC)

A measure of the capital required to absorb any unexpected losses that result from the risks an organisation assumes in regard to its business and operational activities. In insurance RBC management means an insurer calculates the capital needed to support different classes of business. Overall RBC is expressed as a ratio, the total capital of the company divided by the company’s RBC as determined by formulae. The FSA has proposed that insurers will be required to hold the higher amount of minimum capital requirement as set out in the EC Directives and enhanced capital requirement, a more risk sensitive calculation specified by the FSA.

Risk-based capital (RBC) requirements

A method developed by the National Association of Insurance Commissioners (NAIC) to determine the minimum amount of capital required of an insurer to support its operations and write coverage. The insurer’s risk profile (i.e., the amount and classes of business it writes) is used to determine its risk-based capital requirement. Four categories of risk are analyzed in arriving at an insurer’s minimum capital requirement

risk-based health maintenance organization (HMO)/competitive medical plan

Type of managed care organization. After any applicable deductible or copayment, all of an enrollee’s or member’s medical care costs are paid for in return for a monthly premium. However, due to the lock-in provision, all of the enrollee’s or member’s services (except for out-of-area emergency services) must be arranged for by the risk-HMO. Should the Medicare enrollee or member choose to obtain service not arranged for by the plan, he or she will be liable for the costs. Neither the HMO nor the Medicare program will pay for services from providers who are not part of the HMO’s health care system or network.

Risk, Definition (European Union/European Economic Area-Definition of a Risk)

A risk is deemed to be located in an European Union or European Economic Area member state if it is: (a) a building (and its contents issued under the same policy) situated in that state; (b) a motor vehicle, ship, yacht or aircraft registered in that state; (c) a travel policy for four months or less taken out in that state. For any other type of insurance (including a life insurance) it is an individual if the policyholder is habitually resident in the member state or a business or an organization if the establishment to which the contract relates is situated in that state. European Economic Area: The member states of the European Union plus Norway, Iceland and Liechtenstein. European Union : The European Union is made up of 27 Member States: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

Risks

A term used to denote the physical units of property at risk or the object of insurance protection and not Perils or Hazard. Reinsurance by tradition permits each insurance company to frame its own rules for defining units of Risks. The word is also defined as chance of loss or uncertainty of loss.

Risks attaching

Excess of loss reinsurance covering losses on policies issued or renewed during the treaty period until they expire. The attachment point is the key.
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UK: a type of reinsurance; in excess of loss property reinsurance, a risks attaching clause means that cover continues until the expiry of the original risk.