What is a "regulatory audit" in insurance?

A regulatory audit in insurance primarily refers to an examination of an insurer's financial records. This audit is conducted to ensure that the insurer is complying with legal requirements and regulatory standards. The financial records are scrutinized to assess the insurer's financial health, reserves, premium collections, claims payments, and overall solvency.

Regulatory audits play a crucial role in maintaining the integrity of the insurance market and protecting policyholders. By evaluating an insurer's financial situation, regulators can ensure that the company is able to meet its obligations to policyholders and maintain sufficient reserves to cover future claims. This not only helps in identifying financial mismanagement or insolvency risks but also reinforces consumer confidence in the insurance system as a whole.