US Insurance Regulators Ask: What Is A ‘Bond'?

Regulation of insurance company solvency is a key pillar of insurance law worldwide, and in the United States no less than elsewhere. In the US's state-based regulatory system, regulators have a number of tools designed to enable them to monitor the financial condition of insurers. Two of these are statutory accounting and risk-based capital (RBC), both of which are related. Important developments in these areas could affect the way in which insurer's account for complicated financial instruments in their portfolios and could consequently alter the market for such institutional products.

Insurers in the US are required to maintain their accounts using Statutory Accounting Principles (SAP) rather than more common systems such as United States Generally Accepted Accounting Principles (US GAAP) or International Financial Reporting Standards (IFRS). Of course, many insurers and their holding companies also maintain US GAAP or IFRS accounts, in addition to SAP,