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statutory accounting principles (SAP)

Rules for insurance accounting codified by the National Association of Insurance Commissioners (NAIC) or as promulgated by a domicile as rules to be used in reporting an insurer's results to regulators. These rules focus on the balance sheet and solvency analysis, and differ from the generally accepted accounting principles (GAAP) used for other types of businesses. For example, statutory accounting rules do not allow the inclusion of certain nonadmitted assets on the balance sheet; require that certain loss reserves be set by conservative formulas instead of the insurer's estimates; require the insurer to immediately recognize the expenses associated with writing new business instead of amortizing them over the policy period; and do not allow premiums for reinsurance placed with unauthorized reinsurers to be recognized as an asset.

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