Fair value accounting uses the term market value surplus for an organization's net worth. Which one of the following is the term used for an insurer's net worth under SAP

Fair value accounting uses the term market value surplus for an organization's net worth. Which one of the following is the term used for an insurer's net worth under SAP

• A. Net asset value
• B. Risk-based capital
• C. Policyholders' surplus
• D. Shareholders' equity

Answer: (C)

In SAP, the insurer’s net worth is called policyholders’ surplus. This reflects admitted assets minus liabilities under statutory rules, providing the cushion available to policyholders and emphasizing protection for them. The term differs from fair value accounting’s market value surplus by focusing on policyholders rather than owners. Other options don’t fit because net asset value is used for investment funds, risk-based capital is a capital-adequacy measure, and shareholders’ equity is the owner-focused term under GAAP/IFRS, not the statutory net worth concept used for insurers.

In SAP, the insurer’s net worth is called policyholders’ surplus. This reflects admitted assets minus liabilities under statutory rules, providing the cushion available to policyholders and emphasizing protection for them. The term differs from fair value accounting’s market value surplus by focusing on policyholders rather than owners.

Other options don’t fit because net asset value is used for investment funds, risk-based capital is a capital-adequacy measure, and shareholders’ equity is the owner-focused term under GAAP/IFRS, not the statutory net worth concept used for insurers.