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
Same as term Fair access to Insurance Requirements: insurance that grew out of the urban demonstrations and riots of the 1960s. Because of the deteriorated social and economic circumstances ...
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Form of state rating legislation that allows each property/liability insurer to choose between using rates set by a bureau or its own rates. Individual states regulate insurers and approve ...
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