[C008]

capacity
The amount of insurance (measured either by face value of policies or by premium) which an insurer is able or willing to issue as a maximum, as limited by legal restrictions, corporate restrictions, or indirect restrictions. Legal restrictions (e.g., "no policy may be issued for an amount in excess of 10% of policyholder surplus") or corporate restrictions (e.g., a board of directors resolution that "the company shall not knowingly commit itself to a policy amount in excess of $10 million") establish the maximum capacity an insurer is able to write. Indirect restrictions on the capacity an insurer is willing to write include:

1) the financial strength (policyholder surplus) of the insurer, or

2) the willingness of the insurer to venture a portion of its current anticipated underwriting (or overall) profit on a single policy (this willingness could also be expressed as a percent of annual premium) and the confidence felt in that anticipated result.