Business & Finance

What are the resources of an insurance company?


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2016-10-27 21:52:38
2016-10-27 21:52:38

In the United States, insurance companies are regulated by the states in which they operate. Among the most critical parts of that regulation is solvency, meaning that the insurance company has sufficient assets to pay expected claims. When an insurance company wants to conduct business in a state, it must demonstrate that it has assets sufficient to meet the requirements of the state's insurance law. That can include cash, bonds, and various other assets that can be liquidated into cash. The insurance company must also have "reinsurance" which is insurance for the insurer. It serves the purpose of providing back-up protection for the primary insurer in the event of a single large claim, or an aggregate of smaller claims against the primary insurer (beyond the primary insurer's ability to pay). There are various configurations of reinsurance arrangements that are beyond the scope of this answer. State insurance heads also participate in the National Association of Insurance Commissioners (NAIC). There are working groups of the NAIC specifically concerned with assets and solvency because it is such an integral part of any insurance operation.

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