What is meant by "insurance solvency"?

In the context of insurance, "solvency" refers to an insurer's ability to meet its long-term financial obligations, particularly the capacity to pay out claims when they are due. This concept is critical because it assures policyholders that the insurance company can fulfill its obligations, especially in times of significant claim activity, such as during natural disasters or economic downturns.

When an insurer is solvent, it means that it possesses sufficient assets relative to its liabilities and is financially secure enough to handle claims from policyholders. This is a key factor regulators examine to ensure that insurers are operating within safe financial parameters, protecting both policyholders and the overall market.

In contrast, the other choices do not directly reflect the definition of solvency. The ability to sell insurance policies, the total assets held by an insurer, and the rate of return on investments each focus on different aspects of an insurance company's operations or performance rather than its financial health regarding obligations to policyholders.