According to solvency checklists, what must carriers possess to pay claims?

According to solvency checklists, what must carriers possess to pay claims?

• A. Experience and a skilled workforce
• B. Significant data analytics capabilities
• C. Sufficient capital and surplus
• D. A broad market presence

Answer: (C)

To meet the requirements outlined in solvency checklists, carriers must maintain sufficient capital and surplus. This ensures that insurance companies can absorb unexpected losses while continuing to meet their obligations to policyholders. Having adequate capital and surplus acts as a financial buffer, helping insurers remain solvent during adverse conditions, such as high claim payouts due to catastrophic events or economic downturns. This capital not only supports ongoing operations but also instills confidence in policyholders that the carrier has the financial resources necessary to honor claims. Regulators often monitor these metrics closely to protect consumers and ensure the overall stability of the insurance market. Therefore, maintaining sufficient capital and surplus is crucial for any insurer aiming to effectively manage risk and meet its financial commitments to policyholders.

To meet the requirements outlined in solvency checklists, carriers must maintain sufficient capital and surplus. This ensures that insurance companies can absorb unexpected losses while continuing to meet their obligations to policyholders. Having adequate capital and surplus acts as a financial buffer, helping insurers remain solvent during adverse conditions, such as high claim payouts due to catastrophic events or economic downturns.

This capital not only supports ongoing operations but also instills confidence in policyholders that the carrier has the financial resources necessary to honor claims. Regulators often monitor these metrics closely to protect consumers and ensure the overall stability of the insurance market. Therefore, maintaining sufficient capital and surplus is crucial for any insurer aiming to effectively manage risk and meet its financial commitments to policyholders.