CAS Exam 6 (US) key terms

The yearly financial report insurers file with state regulators using NAIC-prescribed formats, prepared on a statutory accounting basis rather than GAAP. It presents assets, liabilities, surplus, and income to demonstrate solvency to regulators.

Conservative accounting rules prescribed by the NAIC and state law that emphasize policyholder protection and insurer solvency. They generally recognize assets at lower values and liabilities at higher values than GAAP, producing more conservative surplus figures.

Accounting standards, primarily set by the FASB, used for general-purpose financial reporting to investors and other users. Insurers must reconcile statutory results to GAAP, which generally smooths earnings and recognizes assets statutory rules exclude.

Assets that statutory accounting rules exclude from the balance sheet because they are not readily available to pay claims, such as furniture, overdue receivables, or certain intangible assets. Their exclusion reduces reported surplus relative to GAAP.

The statutory excess of admitted assets over liabilities, representing the cushion available to absorb unexpected losses and support future obligations. It is the statutory analogue of shareholders' equity and a key solvency indicator.

A regulatory formula that sets minimum capital requirements based on the risks an insurer bears, including asset, credit, underwriting, and reserve risks. Results are expressed as an RBC ratio used to trigger escalating regulatory action levels.

The first RBC intervention threshold, typically 200 percent of the authorized control level. Breaching it requires the insurer to file a corrective plan with regulators, even though the company remains above minimum capital.

An RBC threshold, generally 150 percent of the authorized control level, at which the domiciliary regulator may order corrective actions. The insurer must submit a plan and the regulator gains expanded authority over its operations.

The baseline RBC result calculated by the risk-based capital formula. At 100 percent, the regulator is authorized to take control of the insurer; ratios below 70 percent trigger mandatory control.

The NAIC's Insurance Regulatory Information System, a set of financial ratios calculated from annual statement data. Unusual values flag insurers for further regulatory review, serving as an early-warning screening tool rather than a pass/fail test.

The National Association of Insurance Commissioners, an association of state insurance regulators that develops model laws, accounting guidance, and financial reporting tools. Its work is adopted or adapted by individual states rather than directly imposed.

A debt obligation issued by an insurer that regulators treat as surplus rather than a liability, subject to NAIC conditions. It bolsters statutory capital while imposing interest and repayment obligations on the insurer.

The estimated liability for claims that have been incurred but not yet settled or paid, including reported and unreported claims. Reserve adequacy directly affects statutory surplus and is a central focus of regulators and actuaries.

The portion of loss reserves covering claims that have occurred but have not yet been reported to the insurer. It also includes expected future development on known claims, and it is typically the largest reserve component for long-tail lines.

A formal statement by an appointed actuary about whether recorded loss and loss adjustment expense reserves are reasonable in the aggregate. It accompanies the annual statement and supports regulatory reliance on reported liabilities.

An actuary designated by an insurer to prepare required statutory actuarial opinions and supporting memoranda. The role carries professional and regulatory responsibility for reserve adequacy and related disclosures.

The NAIC model regulation governing the form, content, and filing of appointed actuaries' opinions and supporting memoranda. It specifies qualification standards, scope, and documentation requirements for reserve opinions.

The annual statement schedule presenting loss and loss adjustment expense development by line of business over multiple years. It provides regulators with data to assess reserve adequacy and historical claim emergence patterns.

A reserve required for certain long-duration contracts, such as life insurance, computed using prescribed mortality and interest assumptions. It represents the statutory liability for future policy benefits rather than a company's best estimate.

Costs of acquiring new business, such as commissions, that are capitalized and amortized over the policy period. Statutory rules limit DAC recognition more strictly than GAAP, affecting the timing of reported earnings.

The treatment of ceded premiums, ceded losses, and reinsurance recoverables in statutory statements. Rules govern when reinsurance provides surplus relief and how recoverables are admitted as assets.

The requirement that a reinsurance contract transfer significant insurance risk for the ceding insurer to obtain accounting recognition. Without sufficient risk transfer, the arrangement is treated as financing rather than reinsurance.

An on-site review by state regulators of an insurer's financial condition, records, and compliance with law. Examinations may be conducted on a coordinated multistate basis and typically occur at least every three to five years.

A regulatory review of an insurer's treatment of policyholders, including sales, underwriting, claims, and complaint practices. It focuses on compliance and consumer protection rather than financial solvency.

Prohibited insurer conduct such as misrepresentation, twisting, unfair claim settlement, and improper inducements, addressed through state statutes based on NAIC models. Violations can result in fines, orders, and license actions.

The state system for qualifying and authorizing insurance agents and brokers to sell insurance. Licensing requires examinations, continuing education, and compliance with appointment and termination reporting rules.

Insurance placed with nonadmitted insurers when admitted carriers cannot cover a risk. State laws set eligibility, diligent search, and premium tax requirements for surplus lines brokers and carriers.

A state mechanism that pays covered claims of policyholders of insolvent insurers, funded by assessments on licensed insurers. Coverage is subject to statutory limits and exclusions, and it does not protect all policyholders equally.

The NAIC model law requiring registration and reporting by insurers within holding company systems, plus prior approval for certain transactions. It aims to prevent improper control, double leverage, and self-dealing.

A transaction between an insurer and a related entity, such as a management agreement or asset transfer. Such transactions typically require notice or approval and must be at fair and reasonable terms.

Statutory limits on the dividends an insurer may pay to shareholders without prior regulatory approval, usually tied to prior-year net income and surplus. They protect policyholder funds from excessive upstream distributions.

A confidential internal assessment by an insurer of its material risks and current and projected solvency, summarized in a report to regulators. It is required for insurers above size thresholds under the NAIC model law.

A structured process for identifying, measuring, and managing risks across an insurer, including underwriting, market, credit, operational, and strategic risks. Regulators expect ERM to be integrated into governance and capital decisions.

Prescribed reporting templates, with instructions, that specify the pages, schedules, and detail insurers must file by entity type. They standardize financial reporting so regulators can compare companies nationwide.

A signed statement by an actuary attesting to specified facts, such as compliance with reserve standards or rate-filing requirements. It differs from an opinion in scope and is used in several regulatory contexts.

A state tax levied on insurers based on premiums written or received, often in lieu of or in addition to other taxes. Rates and bases vary by state and line, and surplus lines placements carry their own tax rules.

The annual statement exhibit reporting premiums, losses, expenses, and net income on a statutory basis. It reflects conservative recognition rules and differs materially from GAAP results for the same period.