Solvency Regulation Framework for United States Insurers

Summary

This practice note explores key components of the U.S. system of state-based insurance regulation relating to insurance company solvency. In 1945, the U.S. Congress passed the McCarran-Ferguson Insurance Regulation Act to guarantee that the states would be primarily responsible for regulating the insurance industry. Mainly in response to the 2008 financial crisis and various international developments, the NAIC began to modernize its approach to solvency with the Solvency Modernization Initiative (SMI). SMI addresses the comprehensive self-analysis by insurance regulators of the United States' insurance solvency regulation framework. The SMI focuses on key solvency metrics, including capital requirements, statutory accounting, financial reporting, group supervision, corporate governance, and risk management.