Definition: Admitted Assets are assets that an insurance company is allowed to include on its balance sheet for the purpose of determining its financial solvency as evaluated by regulatory bodies.
Context: These are the types of assets that can be accurately valued and are readily available to cover the company’s liabilities. This type of classification is important for regulatory compliance and financial assessments by state insurance departments or other relevant authorities.
Types of Admitted Assets:
- Cash: Readily available and completely liquid.
- Bonds: High-grade investments rated by recognized agencies.
- Approved stocks: Those meeting specific criteria set by regulatory bodies.
- Real estate: Not all real estate qualifies; typically, it must be necessary for company operations or held for investment.
Regulatory Background
The specifics of what constitutes an admitted asset can differ from one jurisdiction to another based on local laws and regulations. In the United States, this classification is influenced by standards set by the National Association of Insurance Commissioners (NAIC).
For further and more detailed regulatory guidance, you can refer to:
- National Association of Insurance Commissioners (NAIC) website
- Guidelines under the NAIC’s Accounting Practices and Procedures Manual
Importance of Admitted Assets
Understanding what constitutes an admitted asset is crucial for assessing an insurer’s ability to meet its obligations, particularly under times of stress or financial scrutiny. The inclusion of assets not allowed may lead to penalties or re-evaluation of an insurer’s financial health.
Keywords: Admitted Assets; Insurance; Regulations; NAIC
