The risk-based capital requirements for life insurers are based on a formula that considers four types of risk.One risk reflects a range of uncertainties that life insurers face including such things as bad management decisions and guaranty fund assessments.This risk is called

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Business risk reflects the range of uncertainties that life insurers face, including bad management decisions and guaranty fund assessments. Asset risk reflects the possibility of losses from investments, insurance risk reflects losses from underwriting, and interest rate risk reflects fluctuations in market interest rates.

The Risk-Based Capital Requirements for Life Insurers Are Based on a Formula