Term Of The Day – BCAR
BCAR = Adjusted Surplus / Net Required Capital
AM Best invented this term. It is a test of the insurance carrier’s Balance Sheet. Having an unhealthy balance sheet is one of the steps for an insurance carrier to start down the path of insolvency. Balance-sheet strength measures the exposure of a company’s surplus to its operating and financial practices.
AM Best looks at BCAR as one of the major components in the insurance carrier rating analysis. There are similar models procured by the National Association of Insurance Commissioners (NAIC).
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