What is the definition of Statutory Accounting Principles (SAP)?

Statutory Accounting Principles (SAP) are accounting rules that are more conservative. These are a set of rules that were laid down by the National Association of Insurance Commissioners. The state requires insurance companies to follow these accounting principles when they prepare for their accounting reports.

SAP is part of the state insurance commission's way of ensuring that the insurance companies under their jurisdiction remain financially strong and solvent. With the use of SAP, assets that are not that liquid are not included in the ratios that represent the company's solvency. SAP also requires that assets and liabilities are valued accordingly and that expenses related to sales are recorded immediate and not amortized throughout the policy's duration.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage