Statutory Earnings
Revenue based on conservative reserve requirements of various states. Statutory earnings do not meet generally accepted accounting principles (GAAP). A role of state regulation is to make certain that insurers have enough money set aside in statutory reserves to pay all future claims and that the company will remain solvent. For this reason, regulators take a conservative approach to setting reserve requirements. But because an increase in reserves translates into lower earnings for a stock insurer, investors, and securities analysts argue that they are not helpful in gauging the health of a company for investment purposes. Therefore, insurers calculate statutory earnings for regulators and another set of earnings, based on natural reserves, for investors.
Popular Insurance Terms
Deduction allowed for gifts and bequests to a spouse for federal estate and gift tax purposes. Under the Economic Recovery Tax Act of 1981 (ERTA), the deduction became unlimited. Prior to ...
Coverage for a group of individuals under one policy. Usually, members belong to a particular company, union, or trade association. In a contributory plan a lump sum premium is paid by the ...
Provision for known claims due but not paid, known claims not yet due, and provision for incurred but not reported (IBNR) claims. The critical problem facing a casualty insurance company is ...
Type of excess of loss reinsurance in which the insurance company (cedent) cedes its risk of loss on incurred but not reported losses (IBNR) and previously reported losses. ...
Act of stealing. Coverage can be purchased under most property insurance policies such as the homeowners insurance policy. ...
Defined contribution pension plan in which employer contributions are set under a collective bargaining agreement. It usually covers the employees of a number of firms and is administered ...
Wrongful inaction; failure to act; inactivity. ...
Measure of the rate at which policies are cancelled or allowed to lapse. The termination rate is a factor in setting premiums for group life and health policies. ...
Combination of the funds of many policyholders held in a single account and invested as a single entity. ...
Have a question or comment?
We're here to help.