Risk-based capital (RBC) is a regulatory framework that sets minimum capital requirements for insurers based on the specific risks they assume, including asset risk, underwriting risk, interest rate risk, and operational risk. Rather than using a one-size-fits-all capital standard, RBC formulas assign factors to different exposures and calculate a company-specific capital requirement. Regulators compare an insurer's actual capital to required risk-based capital to determine solvency levels and potential need for intervention. Adequate RBC helps ensure that insurers can honor policy promises even under adverse conditions.

Actuaries and finance teams track risk-based capital ratios as part of enterprise risk management and regulatory reporting. Rating agencies, analysts, and institutional buyers review RBC metrics when evaluating carrier strength, especially for companies offering long-duration guarantees or large variable and indexed annuity blocks. Advisors may hear about RBC in due diligence materials or when carriers explain conservative product design choices. While RBC is not typically discussed with retail clients in detail, understanding the concept helps advisors interpret news about insurer financial health and the rationale behind capital-sensitive product features.