Definition - What does Statutory Accounting mean?
Statutory accounting is the accounting practice of insurance companies in the USA. It is different from accounting systems used by other business ventures. That is because insurers frequently give back much of its earnings to its policyholders.
Insuranceopedia explains Statutory Accounting
Generally accepted accounting principles are the ones accountants honor when they make financial statements for business. These principles are not the ones used by accountants when they make financial statements for insurance companies. They refer to statutory accounting principles instead.
Statutory accounting is more rigid than generally accepted accounting principles. Why? It is because the state must watch out for the financial solvency of an insurance company to ensure that it can be able to pay for the coverage of its policyholders.