Risk capital is the capital required to finance the consequences of business risks.
capital
In captive insurance, capital has one of three different meanings: the amount initially needed to set up a captive or the initial amount paid in; the total of this paid-in capital plus other forms of capital, like letters of credit; or the sum of these two plus accumulated surplus.
Additional Information
The difference between capital in a captive and other forms of insurance capital is that the owners usually consider it risk capital, ready to be used up by adverse results of the business. This is why one seldom hears about "impairment of capital" in captive financial discussions. Instead, one hears about "reduction in capital."
Related Terms
Surplus is the amount by which an insurer's assets exceed its liabilities.
