What is meant by Available Solvency Margin ?

Solvency Ratio is a measure of capital adequacy. It is expressed as a ratio of Available Solvency Margin to Required Solvency Margin. The excess of assets over liabilities and other liabilities of policyholders' funds and shareholders' funds maintained by the insurer is referred to as Available Solvency Margin (ASM). IRDAI requires all insurers to maintain a minimum excess asset over liabilities, which is referred to as Required Solvency Margin (RSM). In Insurance, a solvency ratio is a metric used to determine a company's capacity to fulfil its long-term debt obligations. Potential business lenders often use solvency ratios to determine a company's capacity to pay back its long-term debts. A company's financial health can also be assessed by its solvency ratio. An unfavorable ratio might suggest a high likelihood that the company will fail to pay its long-term debts. The Available Solvency Margin (ASM) is the real-world capital cushion an insurance company holds to cover unexpected losses. It is calculated as the total value of the company's admitted assets minus all of its liabilities.