What is the purpose of the trend test?

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The trend test looks at how a company’s RBC ratio changes over time, to spot deterioration early. Its purpose is to provide an early warning that a company may drift toward an RBC ratio below a critical level (such as 200%), allowing regulators to intervene before a solvency issue arises. It isn’t about fixing a solvency threshold, automatically adjusting thresholds, or auditing policyholder communications, but about monitoring downward trends to catch potential problems sooner.