A solvency ratio is a measure of an insurance companys financial health and its ability to meet its debt obligations and other financial commitments. It is calculated by dividing the companys available solvency margin by its required solvency margin. The solvency margin is the extra capital that the company must hold over and above the claim amounts they are likely to incur. A high solvency ratio indicates that the company has enough capital to meet its obligations and instills confidence in its ability to pay claims, meet future contingencies, and business growth plans. The minimum solvency ratio that insurance companies must maintain is 1.5, as mandated by the Insurance Regulatory and Development Authority of India (IRDAI) . The solvency ratio is a critical criterion to consider when choosing an insurance provider, as it indicates the companys ability to pay out claims. A high solvency ratio is better, as it tells you that you can trust the insurance company to pay you or your family the life insurance dues.