Forums » Life Insurance

• T Ghosh

  

  • 144 posts
   

  February 27, 2014 7:46 AM IST

   

    State insurance department ensures the insurance company’s solvency by imposing minimum

  limits on the amount of insurer’s assets, liabilities, capital and surplus.

    

  Assets are all the valued things owned by the company. E.g. cash, investment.

   

    Liabilities are company’s debts and future obligations.

   

    Policy reserves represent the amount the insurer estimates it will need to pay policy benefits

  as they come due.

   

    Owner’s equity is the difference between the amount of the company’s assets and the amount

  of its liabilities.

   

    Capital is the amount of money invested in the company.

   

    Surplus is the amount by which the company’s assets exceed its liabilities and capital.

   

    Assets = Liabilities + owner’s equity.

   

    Annual statement gives the financial standards of the company.

   

    NAIC has developed an organized system to check the insurers business.

   

    Domestic Insurer: When the insurance company becomes financially unsound, the insurance

  commissioner can take steps to rehabilitate – try to make it financially sound or dissolve –

  liquidate the company.

   

    Foreign Insurer: One, which operates the law of another state to revoke or suspend the license

  of the insurance company.

   

    A life and health guaranty association is an organization that works under the inspection of

  state insurance commissioner to protect the policy owner, insureds, and beneficiaries and

  specifies others against the losses if the insurance company is financially unsound.