Under SAP, unrealized capital gains are included in which component?

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Multiple Choice

Under SAP, unrealized capital gains are included in which component?

Under SAP, unrealized investment gains are treated as part of the insurer’s policyholders' surplus rather than as earnings. This accounting approach preserves solvency by preventing market fluctuations from inflating reported income. Unrealized gains increase the surplus cushion available to policyholders, not current income, so they belong in policyholders' surplus. They aren’t recorded as income, nor are they shown as retained earnings or as shareholders' equity on the statutory balance sheet.

Under SAP, unrealized investment gains are treated as part of the insurer’s policyholders' surplus rather than as earnings. This accounting approach preserves solvency by preventing market fluctuations from inflating reported income. Unrealized gains increase the surplus cushion available to policyholders, not current income, so they belong in policyholders' surplus. They aren’t recorded as income, nor are they shown as retained earnings or as shareholders' equity on the statutory balance sheet.

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