A general account generally refers to the combined or aggregate investments and other assets of an

insurance company Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

available to pay claims and benefits to which

insured Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

entities or policyholders are entitled. The general account may also be considered everything that is not represented by a

separate account A separate account is a segregated accounting and reporting account held by an insurance company not in, but rather "separate" from its general account. A separate account allows an investor to choose an investment category according to his indi ...

s of the firm, if such separate account has been established by the company. Should a firm have no separate accounts, then its only account is the general account. The term should not be thought of narrowly in terms of a

bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type o ...

or general ledger account, but rather the broader concept introduced in the first sentence. Policyholders of insurance policies (that are not associated with separate accounts) do not have a legal or other direct interest or right to the assets or investments of the insurance company's general account, but rather these obligations for benefits or claims are general obligations of the company. In this case, policyholders are subject to credit risk of the insurance company-- that is, should the insurance company fail or go bankrupt, the claims or cash values of policies are not directly backed or collateralized by the company's investments and other assets. In the U.S., state insurance departments examine (audit) insurance companies to evaluate many things, principally to see if the company is sound and policyholder interests are protected.

A.M. Best AM Best is an American credit rating agency headquartered in Oldwick, New Jersey, that focuses on the insurance industry. Both the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners have designated ...

is an example of an insurance

rating agency A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may ra ...

who evaluates and rates many companies on various factors such as financial strength, claims-paying and other policyholder servicing experiences.

References

{{accounting-stub Insurance Accounting