Written By: varun saxena

varun saxena

Term & Life Insurance

I am a passionate content writer with over three years of experience in the insurance domain. An avid learner, I always tries stays ahead of the industry's trends, ensuring my writing remains fresh and includes the latest insurance shifts. Through my work, I strive to engage with targeted insurance readers.

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Reviewed By: Simran saxena

Simran saxena

Health and Term Insurance

Simran has over 3 years of experience in content marketing, insurance, and healthcare sectors. Her motto to make health and term insurance simple for our readers has proven to make insurance lingos simple and easy to understand by our readers.

Updated on Sep 30, 2023 4 min read

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Term Insurance, Content Writer

Content Manager with heart, mind, and soul dedicated to creating impactful content that exceeds the market standard, delivers and reaches the readers conveniently. Besides producing high-ranking content, my focus lies in creating content that solves user queries and adds value.

Written By: Himanshu Kumar

Updated on Jan 15, 2025

Anchita Bhattacharyya

Term Insurance, Content Manager

Content Manager with heart, mind, and soul dedicated to creating impactful content that exceeds the market standard, delivers and reaches the readers conveniently. Besides producing high-ranking content, my focus lies in creating content that solves user queries and adds value.

Reviewed By: Anchita Bhattacharyya

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Written By: Rhishabh Garg

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Rhishabh Garg is the Business Unit Head of Term Insurance at Policybazaar.com. He has over 10 years of experience and currently plays a crucial role in shaping the future of term insurance in the company. Rhishabh also has experience in customer services and crafts new strategies for organizational success, one of which is Policybazaar’s claim assistance program.

Reviewed By: Santosh Agrawal

Santosh AgrawalChief Business Officer

Santosh Agarwal is the Chief Business Officer of life Insurance at Policybazaar.com and has over a decade of experience in the insurance domain. She has helped shape Policybazaar's life insurance vertical and ensures the effective execution of the company's overall strategy. Santosh is also responsible for the Term Insurance for Women domain at Policybazaar.com and educates the masses about its importance and benefits.

What is the Solvency Ratio in Health Insurance?

Solvency ratio is a very important component for the financial analyst and the customers to determine if the insurance company is doing financially well or not. Solvency ratios are known as the leverage ratios. It is believed that the insurance companies which have good solvency ratios are considered good financially.

Irdai have set guidelines to all insurance companies to set a minimum solvency ratio of 1.5.

How to Calculate Solvency Ratio?

Solvency Ratio Formula
Solvency Ratio=(Net Income + Depreciation) / (Short-Term Liabilities + Long-Term Liabilities)

Types of Solvency Ratio In Health Insurance

There are four different types of solvency ratios

• Debt to Equity ratio.
• Debt ratio.
• Proprietary Ratio or Equity Ratio
• Interest Coverage Ratio

How Solvency Ratio Matters Before Purchasing Any Insurance

• The solvency ratio is an important factor to know about the insurance company before purchasing any insurance coverage.
• It helps to understand the financial health and stability of insurance providers.
• A high solvency ratio indicates that the insurance company has a solid financial position and can meet its long-term obligations, including claim payouts.
• Purchasing insurance often involves a long-term commitment, such as life insurance or annuities.
• Knowing that your insurance provider is financially stable and has a high solvency ratio can provide peace of mind.

What is a Good Solvency Ratio?

• A good solvency ratio means that it carries as many minimum values as the IRDAI set benchmark.
• Solvency ratio above the parameter of 1.5 set by irdai is considered to be a good solvency ratio. It determines the insurance company has a healthy holding of assets over liabilities in case to cover the loss of the company.
• A Good solvency ratio indicates that the company has a good corpus of assets over liabilities that helps in any obligations, or any types of financial loss to the company.
• The insurer with a good solvency ratio also attracts the ace investors, to invest in them as they also know the good solvency ratio indicates the trust of customers.

Top companies for 1 Crore Health Insurance having good Solvency ratio

IRDAI Guidelines For Solvency Ratio

• IRDAI set a benchmark for all insurers to maintain a minimum excess assets over liabilities.
• The solvency margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur. It is a financial backup in extreme situations, enabling the company to settle all claims.
• IRDAI mandates a minimum solvency margin of 150%.
• The minimum solvency ratio insurance companies must maintain is 1.5 to lower risks.

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