Capitalization

9 months ago

Insurance Glossary Team

1 minute

Plain English Definition: Capitalization in insurance refers to the process of funding insurance companies to ensure they can meet future claims obligations.

What Capitalization really means for someone with an insurance policy

Capitalization ensures that insurance companies have sufficient financial resources to pay claims. It involves securing funds from investors, retained earnings, or other financial instruments.

Capitalization Real World Examples

An insurance company issues bonds to raise capital for future claims.
Shareholders invest in an insurance firm to boost its claim-paying ability.
Retained profits are used to strengthen an insurer’s financial reserves.