Solvency in insurance is best described as

• A. Solvency targets and profitability
• B. Solvency determines underwriting guidelines
• C. Solvency ensures the insurer can meet its financial obligations and is monitored by regulators.
• D. Solvency is about setting premium rates

Answer: (C)

Solvency is about the insurer’s ability to meet its financial obligations to policyholders and other creditors. It reflects whether the company has enough assets, capital, and reserves to pay claims as they come due, now and in the future. Regulators monitor solvency to ensure ongoing financial strength, using requirements like capital adequacy and reserves to protect policyholders. Among the options, the statement that the insurer can meet its financial obligations and is monitored by regulators best captures what solvency means in practice. The other ideas describe pricing, underwriting guidelines, or profitability goals, which are important but do not define solvency itself.