What governs the solvency requirements for insurers?

State minimum capital and surplus requirements are the primary governance for the solvency of insurers. These requirements ensure that insurance companies maintain a certain level of financial strength and stability to meet their ongoing obligations to policyholders. Regulatory authorities set these minimum levels to help ensure that insurers can pay claims, even in adverse financial conditions.

This regulatory framework is designed to guard against insolvency, which can lead to policyholder losses and undermine the insurance system. By establishing strict capital requirements, state regulators can better protect consumers and uphold the integrity of the insurance market.

Other options like international banking standards, insurers’ financial discretion, and performance-based benchmarks may influence financial stability or operational performance, but they do not directly set the solvency standards mandated for insurers. Therefore, the focus on state-level regulations reflects the essential role they play in safeguarding the financial health of the insurance industry.