State RegulationsPA specificDifficulty 1/5
What is the primary purpose of Pennsylvania's solvency examinations of insurance companies?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The solvency statutes, 40 P.S. § 72 and 40 P.S. § 112, direct the Insurance Commissioner, through the Pennsylvania Insurance Department, to examine insurers' financial condition so the department can confirm that companies can pay the claims and benefits their policyholders are owed. Solvency oversight is consumer protection at the company level: it is how the state detects financial deterioration before it becomes insolvency.
Why the other options are wrong
- A) Solvency examinations assess financial strength, not profit guarantees; rate adequacy is addressed separately under the rate statutes.
- C) Tax auditing is a revenue function; the solvency examination under 40 P.S. § 72 looks to the insurer's ability to meet policyholder obligations.
- D) Advertising content is a market-conduct subject; solvency examinations target financial condition, not slogans.
Memory hook
Solvency exams ask one question: can the insurer still pay its promises?