Solvency is the ability of insurance company to meet its financial obligations as they become due even those resulting from insured losses that might be claimed several years in the future.
Solvency surveillance is the process conducted by state insurance regulators of verifying the solvency of insurance companies and determining whether the financial condition of insurers enables them to meet their obligations and to remain in business in the long term.
Two major aspects of Solvency Surveillance are Insurance Company Examinations and Insurance Regulatory Information Systems (IRIS).
Insurance Company Examinations consists of thorough analysis of insurance company operations and financial conditions. During Examination, a team of state examiners reviews a wide range of activities including claim, underwriting, marketing and accounting and financial records.
The Insurance Regulatory Information Systems (IRIS) is designed by NAIC to help regulators identify insurance companies with potential financial problems. In other words, it is an Early Warning System to monitor overall financial conditions of an insurance company in an analytical way.
