# Regulation and Solvency Glossary

> 44 terms from the Insurance book's Regulation and Solvency part, each defined in a line and linked to the chapter that explains it.

- **Accreditation:** the NAIC program under which a state's financial regulation of its domestic insurers meets standards (laws, practices, staffing, licensing) that other states rely on instead of re-examining ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#accreditation)).
- **Adverse Consumer Outcome:** in the NAIC AI bulletin, a decision subject to insurance regulatory standards that adversely affects a consumer ([Data, AI & Privacy Rules](https://www.syntaqx.com/books/insurance/data-ai-and-privacy-rules#the-naic-ai-model-bulletin)).
- **Adverse impact ratio:** a group's favorable-outcome rate divided by the highest group's rate, one of the metrics New York's Circular Letter No. 7 names ([Data, AI & Privacy Rules](https://www.syntaqx.com/books/insurance/data-ai-and-privacy-rules#worked-numbers-an-adverse-impact-ratio)).
- **AIS Program:** the written program for the responsible use of AI systems in regulated insurance decisions that the NAIC AI Model Bulletin expects every insurer to maintain ([Data, AI & Privacy Rules](https://www.syntaqx.com/books/insurance/data-ai-and-privacy-rules#the-naic-ai-model-bulletin)).
- **Annual statement:** the NAIC-format statutory financial statement each insurer files for each legal entity, due March 1 ([Statutory Accounting & the Annual Statement](https://www.syntaqx.com/books/insurance/statutory-accounting#the-annual-statement)).
- **Annual statement line:** the NAIC line-of-business classification (homeowners line 4, workers' comp line 16) every statutory figure is reported by ([Statutory Accounting & the Annual Statement](https://www.syntaqx.com/books/insurance/statutory-accounting#the-annual-statement)).
- **Authorized Control Level RBC (ACL):** the capital amount the RBC formula produces, against which every RBC action level is a multiple ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#the-formula)).
- **Company Action Level:** total adjusted capital from 150% to under 200% of ACL, or 200% to 300% with a trend test trigger; the insurer must file an RBC plan within 45 days ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#the-action-levels)).
- **Complaint register:** the record of all complaints since the last exam, by line, nature, disposition and time to process, that the Unfair Trade Practices Act requires ([Market Conduct & Unfair Practices](https://www.syntaqx.com/books/insurance/market-conduct#complaints-and-their-clocks)).
- **Covered agreement:** a federal agreement with a foreign government on prudential insurance measures, under which FIO may preempt inconsistent state measures ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#covered-agreements)).
- **Covered claim:** a claim under a liquidated insurer's policy that a guaranty association pays, up to the state's cap ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-p-c-guaranty-system)).
- **Deemer:** a statutory period after which a filing is deemed approved if the regulator hasn't acted (Florida's 90 days, California's 60 and 180) ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#the-regimes)).
- **Depopulation (takeout):** moving policies from a residual market back to private insurers through approved offers ([Stressed & Residual Markets](https://www.syntaqx.com/books/insurance/stressed-markets#citizens-eligibility-rates-and-depopulation)).
- **Domiciliary state:** the state where an insurer is incorporated, which alone regulates its solvency, holding company transactions and receivership ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#the-commissioner-and-the-department)).
- **FAIR plan:** a state property insurance placement facility funded by member insurers, for property owners the voluntary market won't insure ([Stressed & Residual Markets](https://www.syntaqx.com/books/insurance/stressed-markets#property-plans-elsewhere)).
- **Federal Insurance Office (FIO):** the Treasury office that monitors insurance, runs the terrorism program and can preempt state measures only under covered agreements ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#the-federal-insurance-office)).
- **File-and-use:** a rate regime in which a filed rate may be used after a waiting period or on filing, subject to later disapproval ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#the-regimes)).
- **Flex rating:** a regime in which rate changes within a band take effect without prior approval and larger ones need it ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#new-york-flex-rating)).
- **Guaranty association:** a state association that pays covered claims of liquidated insurers up to statutory caps, funded by assessments on solvent insurers ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-p-c-guaranty-system)).
- **Insurance Data Security Model Law (#668):** the NAIC model requiring an information security program, third-party oversight, 72-hour notice of cybersecurity events and an annual certification ([Data, AI & Privacy Rules](https://www.syntaqx.com/books/insurance/data-ai-and-privacy-rules#data-security-model-668-and-part-500)).
- **IRIS ratios:** the NAIC's 13 P&C and 12 life financial ratios computed from annual statements, with published industry means and medians ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#iris-ratios)).
- **Liquidation:** the receivership stage in which the liquidator takes the insurer's assets, policies cancel after 30 days and guaranty associations pay covered claims ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-stages)).
- **Market conduct annual statement (MCAS):** the NAIC's annual collection of claims and underwriting data in 13 lines for market analysis ([Market Conduct & Unfair Practices](https://www.syntaqx.com/books/insurance/market-conduct#the-market-conduct-annual-statement)).
- **Market conduct examination:** a regulator's review of an insurer's treatment of consumers, from data requests and samples to a public report ([Market Conduct & Unfair Practices](https://www.syntaqx.com/books/insurance/market-conduct#how-market-regulation-works)).
- **McCarran-Ferguson Act:** the 1945 federal law leaving insurance regulation and taxation to the states unless a federal law specifically relates to insurance ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#where-the-authority-comes-from)).
- **Model law:** a draft statute or regulation the NAIC adopts for states to enact; it binds no one until a state does ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#how-a-model-becomes-law)).
- **NAIC:** the National Association of Insurance Commissioners, the standard-setting body of the 56 jurisdictions' chief insurance regulators ([The State System](https://www.syntaqx.com/books/insurance/the-state-system#the-naic)).
- **Nonadmitted asset:** an asset statutory accounting excludes from the balance sheet because it can't pay claims, reducing surplus ([Statutory Accounting & the Annual Statement](https://www.syntaqx.com/books/insurance/statutory-accounting#admitted-and-nonadmitted-assets)).
- **ORSA:** the Own Risk and Solvency Assessment, a confidential internal assessment of material risks and capital filed annually by insurers above $500 million (groups above $1 billion) ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#orsa)).
- **Permitted practice:** a departure from statutory accounting a domiciliary regulator approves for one insurer ([Statutory Accounting & the Annual Statement](https://www.syntaqx.com/books/insurance/statutory-accounting#what-sap-is)).
- **Prior approval:** a rate regime in which a rate may not be used until approved or deemed approved ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#the-regimes)).
- **Priority of distribution:** the statutory order in which a liquidated insurer's estate pays claims, policyholders ahead of general creditors ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-priority-of-distribution)).
- **Proposition 103:** California's 1988 initiative imposing prior approval of property-casualty rates, a rollback and compensated intervenors ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#california-proposition-103)), and requiring auto rates to follow three mandatory factors in decreasing order of importance ([What You May Rate On](https://www.syntaqx.com/books/insurance/rating-factors-and-limits#california-s-proposition-103)).
- **RBC ratio:** total adjusted capital divided by Authorized Control Level RBC; regulatory action begins below 200% ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#risk-based-capital)).
- **Receivership:** state court proceedings (conservation, rehabilitation, liquidation) in which the commissioner takes over a troubled insurer ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-stages)).
- **Rehabilitation:** the receivership stage in which the receiver runs the insurer to restore or restructure it, with a plan due within a year ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-stages)).
- **Residual market:** a mechanism (state insurer, FAIR plan, assigned risk plan, JUA, reinsurance facility) for risks the voluntary market won't take ([Stressed & Residual Markets](https://www.syntaqx.com/books/insurance/stressed-markets#the-residual-market-as-a-system)).
- **SERFF:** the NAIC's System for Electronic Rates and Forms Filing, through which rate, rule and form filings reach the states ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#serff-and-the-parts-of-a-filing)).
- **Statutory accounting principles (SAP):** the conservative, solvency-focused accounting basis of the NAIC's Accounting Practices and Procedures Manual that insurers file on ([Statutory Accounting & the Annual Statement](https://www.syntaqx.com/books/insurance/statutory-accounting#what-sap-is)).
- **Total adjusted capital (TAC):** the capital measure compared against RBC levels, based on statutory surplus with prescribed adjustments ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#the-formula)).
- **Trend test:** the RBC test that treats a company at 200% to 300% as at the Company Action Level when its combined ratio exceeds 120% (P&C) or its margin trends below 1.9 times ACL (life) ([Solvency & Capital](https://www.syntaqx.com/books/insurance/solvency-and-capital#the-trend-tests)).
- **Unfair Trade Practices Act:** the NAIC model (#880) and state laws defining misrepresentation, unfair discrimination, rebating and record failures as unfair practices when flagrant or a general business practice ([Market Conduct & Unfair Practices](https://www.syntaqx.com/books/insurance/market-conduct#the-unfair-trade-practices-act)).
- **Uniform Data Standard (UDS):** the NCIGF file format in which receivers and guaranty associations exchange open claims (A records), unearned premium (B records) and payments ([When Insurers Fail](https://www.syntaqx.com/books/insurance/when-insurers-fail#the-data-handoff-uds)).
- **Use-and-file:** a rate regime in which a rate may be used first and filed within a set period, subject to refund if unjustified ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#the-regimes)).

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