211 ANNUAL REPORT 2010 Borrowings not related to capital funding of insurance activities  consists of operational funding including US regulation XXX and  guideline AXXX redundant reserves. In the ordinary course of  business, AEGON N.V. may at times have borrowings, which are  offset by cash and cash equivalents available for future capital  management activities, such as funding capital contributions in  its subsidiaries, redemption of borrowings or payment of  dividends to its shareholders.  The total capital base is a non-IFRS measure, as IFRS does not  permit separate presentation of borrowings based on the  deployment of the proceeds.  In the United States, regulation of the insurance business is  principally at the state level. State insurance regulators and the  National Association of Insurance Commissioners have adopted  risk-based capital (RBC) requirements for insurance companies.  RBC calculations measure the ratio of a company’s statutory  capital, which is measured on a prudent regulatory accounting  basis, to a minimum capital amount determined by the RBC  formula. The RBC formula measures exposures to investment  risk, insurance risk, market risk, and general business risk. Life  reinsurance is treated as life insurance. The most pertinent RBC  measure is the company action level (CAL) RBC. This is the  highest regulatory intervention level and is the level at which a  Company has to submit a plan to its state regulators. The CAL is  200% of the authorized control level (ACL), the level at which  regulators are permitted to seize control of the Company. At the  end of 2010, the combined risk based capital ratio of AEGON’s  life insurance subsidiaries in the United States was  approximately 412% of the CAL RBC.  AEGON N.V. is subject to certain financial covenants in some of  its financial agreements (such as issued debentures, credit  facilities and ISDA agreements). Under these financial  covenants, an event of default may occur if and when any  financial indebtedness of any member of the Group is not paid  when due, or not paid within any applicable grace period. The  financial agreements may also include a cross default provision  which may be triggered if and when any financial indebtedness  of any member of the Group is declared to be or otherwise  becomes due and payable prior to its specified maturity as a  result of an event of default.  For the insurance and reinsurance undertakings of AEGON in  the EU, the European Solvency I directives are applicable, as  implemented in the relevant member states. Solvency I allows  member states to require solvency standards, exceeding the  minimum requirements set by the Solvency I directives. For life  insurance companies, the Solvency I capital requirement is by  and large the sum of 4% of insurance and investment liabilities  for general account and 1% of insurance and investment  liabilities for account policyholders if no guaranteed investment  returns are given. At the end of 2010, AEGON The Netherlands  consolidated solvency capital ratio based on IFRS was  approximately 200%. All financial agreements are closely monitored periodically to  asses the likelihood of a breach of any financial covenant and  the likelihood thereof in the near future. On the basis of this  assessment, a breach of any such covenant has not occurred. Insurance, reinsurance, investment management and banking  companies are required to maintain a minimum solvency margin  based on applicable local regulations. For managing AEGON’s  capital, the life insurance and life reinsurance regulations in the  European Union (EU) and the United States are of main  importance. AEGON’s Insurance Group Directive ratio (IGD ratio)  was 198%. The calculation of the IGD ratio is based on Solvency I  capital requirements for entities within the EU (Pillar 1 for  AEGON UK), and local regulatory solvency measurements for  non-EU entities. Specifically, required capital for the life  insurance companies in the US is calculated as two times the  upper end of the Company Action Level range (200%) as  applied by the National Association of Insurance Commissioners  in the US. The calculation of the IGD ratio excludes the available  and required capital of the UK With-profit funds. In the UK  solvency surplus calculation the local regulator only allows the  available capital number of the With-profit funds included in  overall local available capital to be equal to the amount of  With-profit funds’ required capital. The Financial Services Authority (FSA) regulates insurance  companies in the United Kingdom under the Financial Services  and Markets Act 2000 and sets minimum solvency standards.  Companies must manage their solvency positions according to  the most stringent of the published Solvency I measure (Pillar 1)  and a privately submitted economic capital measure (Pillar 2). For AEGON UK, the published measure continues to be the most  stringent requirement. At the end of 2010, AEGON UK’s  aggregate Pillar 1 capital ratio was approximately 152%  (excluding With-profit funds). In the local solvency surplus  calculation for regulatory filings, the local regulator (FSA) only  allows the available capital number of the With-profits funds  included in overall available capital to be equal to the amount of  With-profits funds’ required capital. SHARPENING OUR FOCUS