What does solvency refer to in insurance companies?

Solvency in the context of insurance companies refers to the company's ability to meet its long-term obligations and financial commitments, especially in paying claims to policyholders. This concept is critical because it ensures that an insurance company can fulfill its promises to policyholders, even in adverse situations.

When assessing solvency, regulators and stakeholders look at the assets and liabilities of an insurance company. A solvent insurer has sufficient assets to cover its liabilities, which include claims and other financial obligations that may arise in the future. This financial stability is vital for maintaining consumer confidence and the overall health of the insurance market.

The other options focus on aspects that do not provide a direct indication of an insurance company's ability to meet its long-term obligations. While total assets are important, they do not account for the company's liabilities; therefore, they don't directly assess solvency. The number of policies sold and market share relate more to the company's market presence and business performance rather than its financial health and ability to pay out claims.