I know you’re all sitting up late at night wondering how to explain the Risk Based Capital (RBC) score to your customers, so here we go!

RBC is a score used by state regulators to determine if an insurance company has enough capital to support the policies it has issued. Capital is money in the bank, also known as surplus. Not only is the RBC analysis a warning system for regulators, the Office of Insurance Regulation (OIR) must take certain actions if a company’s score falls below required levels.

In Florida, the minimum RBC score a company must have is 300(%). A score below 300 forces the OIR to place the company in review status and requires the company to submit a detailed plan of action describing the steps they plan to take to restore their RBC above 300. A RBC score below 200(%) results in liquidation.

The RBC score takes into consideration these major factors:

  • How much risk the company has assumed, and whether it is concentrated in certain areas.
  • How much capital the company has and how it is invested.
  • The company’s operating expenses and loss reserves.
  • How fast the company is writing new policies. A company that is growing quickly must have the capital to support the business right away.
  • How much reinsurance the company has purchased, what level of risk the company has retained, and the financial standing of their reinsurers.
  • How long the company has been in business.

A surplus requirement score is calculated after applying a complex formula that takes into account the above factors. That score is then compared to the actual surplus a company has on hand to arrive at the RBC ratio. An RBC score of 400(%) indicates that the company has four times the minimum required surplus to support their current premium volume.

Each quarter Willis Re publishes a summary of the financials for the Florida Domestic Insurance Market, and we’re pleased to make this available to you. Go to our RPM system under Resources/Support Docs/Category—Agent Memos; titled Willis Re’s Financials for Florida Domestic Carriers. This document has a wealth of financial information for all the Florida carriers. Please see page 4 for the RBC Score.

Kathleen Davis, CPCU, CIC, ARM, API

About Kathleen Davis, CPCU, CIC, ARM, API

VP, Customer Relations
Tower Hill Insurance Group

Kat is a 1st Degree Insurance Nerd who started her career at Rollins Burdick Hunter (now AON) in Chicago, 1980. Kat spent 19 years in the brokerage/agency business in Chicago, Los Angeles, and Ft. Myers, FL. She was an Account Manager for most of this time handling retail and service businesses, and specializing in construction sub-contractors. Along the way she picked up her ARM, CPCU, API, and CIC designations (they were just lying around). Kat was hired by Tower Hill Insurance Group in 1999 to start their Training Department where she wrote and presented employee training and agency CE classes. In 2006 Kat moved to Underwriting to finally use her CPCU and picked up all kinds of great stories. She says: “Insurance is a laugh a minute, and I can’t understand why some people don’t see it.” In 2013, Kat was reassigned to Administration to assist Tower Hill’s Customer Service Department.