How can the solvency of an insurer be assessed?

The solvency of an insurer is primarily assessed by reviewing its financial statements and claim payouts. This method provides insight into the financial health of the insurance company, indicating whether it has enough assets and reserves to meet its future obligations to policyholders.

Financial statements, including the balance sheet and income statement, reveal important information about the company's assets, liabilities, revenues, and expenses. Evaluating these figures allows stakeholders to determine if the insurer can cover claims and operate sustainably over time. Additionally, an assessment of claim payouts gives a better picture of how well the insurer is managing its liabilities, including the frequency and amount of claims paid, which is critical for understanding operational performance and liquidity.

Customer satisfaction ratings, market share, and the insurance policies offered, although important metrics for understanding an insurer's performance and competitive position, do not directly reflect its ability to fulfill financial obligations. Therefore, while these factors might contribute to a broader evaluation of the insurer's overall business model and customer engagement, they do not provide a clear picture of solvency in the same way that financial assessments do.