Carrying Value, in the context of insurance, refers to the value of an investment recorded on the insurer’s balance sheet. This is specifically relevant under the Statutory Accounting Principles (SAP), which are standards prescribed by the National Association of Insurance Commissioners (NAIC) for insurance companies.
Definition Detail
SAP Book Value: This is the initial value of the investment, reflecting the cost of purchase adjusted for any capital improvements and amortized over its useful life.
Accrued Interest: Represents the amount of interest that has been earned on the investment but has not yet been paid as of the valuation date.
Valuation Allowance: This is a deduction applied against assets to reflect a decrease in their value, typically used when the fair market value of the investment falls below its recorded book value.
Nonadmitted Adjustment: An adjustment done to exclude certain assets from an insurer’s admitted assets list, determining the insurer’s financial solvency under regulatory accounting rules. Nonadmitted assets may include investments which are considered riskier or less liquid.
Context in Insurance
The Carrying Value is important for insurance companies as it affects the solvency margin and is supposed to be reflective of the realistic current value of assets while adhering to conservative accounting norms prescribed by regulation.
For additional details, refer to guidelines from the National Association of Insurance Commissioners (NAIC).
