In relation to businesses in general, the admitted assets are the economic resources available for a particular business. These assets could be tangible or intangible. In practice, this concept could be applied to all things that function in favor of the production value and that are owned by the business. Cash is considered an asset too. Cash values represent the assets’ values.
Let’s see some examples of admitted assets. These are some things that are considered tangible assets: currency holdings, buildings or real state, equipment, precious metals. Other things like franchise holders and holdings, trademarks, patents, goodwill, brands, and brand names are classified as intangible assets.
Insurance Companies: Admitted Assets vs Non-Admitted Assets
When it comes to insurance companies, the definition of admitted assets is different. In this case, the admitted assets are the insurance company’s assets that they could use up to cover their debts. The states have particular laws that regulate how insurance companies should account for and register their admitted assets in financial statements.
An insurer’s admitted assets are the resources they have for backing auto insurance claims filings and making claim payments during a year. Therefore, these assets should be liquid and capable of being valued. This is a significant matter for insurance companies because, in the case of a high number of simultaneous claims, admitted assets determine their capacity to pay for those claims.
For an insurance company, the group “all other assets” are formed by all assets that do not signify an income for the company. They are not part of the admitted assets. Consequently, they can not count furniture, buildings, and liabilities through unpaid or deferred premiums. Invested assets are the total amount of money that an insurance company has destined to investment vehicles, say stocks or bonds. This kind of asset generates a premium for the company, and they are not part of the admitted asset either.
In some states of the United States, the unpaid and deferred premiums are classified as non-admissible or non-admitted assets in accounting. They might not be included in the “all other assets” group.
Insurance Companies in The US And Their Admitted Assets
Almost all admitted assets reported by the insurance companies in the United States are accounts receivable, stocks, and mortgages. All these things could be rapidly transformed into cash in case the insurance company has to face an avalanche of claims.
An insurance company is considered insolvent when its legal responsibilities overdo its admitted assets. When an insurance provider is in bankruptcy, each state has laws to regulate the way of dealing with a claim.
Commonly, the admitted assets and the maximum claim payments that could be paid out to all possible claimants in a period in an insurance company are not equal. Nevertheless, the admitted assets should be high enough to pay for most potential contingencies possible.
When shopping for an insurance policy, in addition to comparing free auto insurance quotes to find the prices that suit you best, make sure the company has enough admitted assets to support a claim at the right time you need it. It would be utterly distressing if once you’ve been in an accident and after months and years paying for a policy believing you would be adequately covered, you come to discover that your company has insufficient funds.