What factors will affect the solvency of insurance companies?

Solvency is the basic index that must be considered when measuring the financial situation of insurance companies. Solvency is the ability of insurance companies to repay debts. The company's assets must be greater than its liabilities, and the difference between total assets and liabilities is the policyholder's surplus.

In order to ensure that insurance companies do not exaggerate the income of their policyholders, regulators require them to adopt conservative accounting procedures. These procedures only allow insurance companies to reflect recognized assets in their financial statements. There are certain regulations on the types of authorized assets, and they must be easily converted into cash. The accounting procedures that insurance companies must adopt also require insurance companies to list loss reserves and unexpired liability reserves as liabilities.

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