Legal Definitions - admitted asset

An admitted asset refers to an asset that a regulated entity, most commonly an insurance company, is permitted by regulatory authorities to include on its financial statements when calculating its solvency and financial strength. These assets are considered reliable, liquid, and secure enough to meet future obligations to policyholders. Regulators establish strict rules to determine which assets qualify as "admitted" to ensure the company has sufficient dependable resources to pay claims and maintain financial stability. Assets that do not meet these criteria are called "non-admitted assets" and cannot be counted towards the company's required reserves.

• Example 1: Government Bonds

  An insurance company holds a significant portfolio of U.S. Treasury bonds. Because these bonds are issued by the federal government, they are considered extremely low-risk and highly liquid, meaning they can be easily converted to cash. The state insurance department readily allows the company to count the full value of these bonds as admitted assets when assessing its financial reserves.

  This illustrates the term because the regulatory authority (the state insurance department) has "admitted" or approved these secure and liquid investments to be included in the company's official financial strength calculations.

• Example 2: Commercial Real Estate

  A large life insurance company owns an office building in a major city, which it leases out to various businesses, generating rental income. This property is held as an investment and is managed to produce revenue. Provided the property meets specific regulatory criteria regarding valuation, title, and encumbrances, the insurance company can list this commercial real estate as an admitted asset on its balance sheet.

  This example shows that certain types of real estate, when held for investment purposes and meeting regulatory standards for stability and value, are considered dependable enough to be counted towards an insurer's financial solvency.

• Example 3: Uncollected Premiums

  An auto insurance provider has a balance of premiums due from policyholders for policies that are currently in force. The company's accounting records show that a portion of these premiums are due within the next 60 days and have a high probability of collection. The state regulator allows the company to count these short-term, collectible premium balances as admitted assets.

  Here, the term applies to money owed to the company. Because these premiums are expected to be collected reliably and within a short timeframe, regulators deem them sufficiently dependable to be included as assets that contribute to the company's financial health. Conversely, premiums that are long overdue or deemed uncollectible would typically be classified as non-admitted.