Defined terms for the annuity market and lifetime income landscape.
The spread-based business model is the carrier business model in which the insurer earns its margin by investing premium dollars at a yield above what it credits to or pays under the contract, with that yield differential funding the carrier's costs, capital charges, and profit.
Statutory accounting principles, often shortened to SAP, are the specialized accounting standards that US insurance carriers use for the financial statements they file with state insurance regulators, designed to measure a carrier's solvency rather than its profitability.
Statutory surplus is the amount by which an insurance carrier's admitted assets exceed its statutory liabilities, representing the regulatory capital cushion that supports new business, absorbs adverse experience, and determines the carrier's capacity to write and back new contracts.
Surplus notes are subordinated debt instruments issued by an insurance carrier that receive treatment as part of the carrier's statutory surplus under US insurance regulatory accounting, subject to specific approval requirements and payment restrictions enforced by state insurance regulators.
Total adjusted capital is the measure of an insurance carrier's available capital used as the numerator in the risk-based capital ratio, consisting of statutory surplus plus specified additions including the asset valuation reserve and other items prescribed by state insurance regulators.
