Solvency

Solvency refers to the financial capability of an insurance company to meet its long-term obligations, particularly the ability to pay out claims and benefits associated with Indexed Universal Life insurance policies. It is a measure of the insurer's financial health and stability, ensuring that the company can honor the commitments made in the IUL contracts, such as death benefits, cash value accumulation, and potential index-linked interest credits. Regulatory bodies often require insurance companies to maintain certain solvency ratios to ensure they have adequate reserves to cover policyholder claims.