Free asset ratio

A solvency measure used by British life insurance companies, the free asset ratio is:

(available assets - required minimum margin of solvency) ÷admissible assets

The exact definition varies and the numbers disclosed by different companies as headline free asset ratios may not be comparable. For example, some companies include future profits. The ratio will also depend on the assumptions made in valuing liabilities.

In general, the higher the ratio, the more surplus capital a company has available.

Copyright Graeme Pietersz © 2005-2019