What does the term solvency refer to in the context of insurance?

Solvency in the context of insurance refers specifically to the ability of an insurer to meet its long-term financial obligations, which primarily includes paying all insured losses. This means that an insurer must have sufficient assets to cover its liabilities, including current and future claims.

Understanding solvency is crucial because, if an insurer is not solvent, it cannot fulfill its contractual obligations to policyholders, leading to financial instability and the potential for bankruptcy. Thus, solvency serves as a key indicator of an insurer’s financial health and reliability, assuring policyholders that their claims will be honored.

The other options focus on aspects of business operations and marketing rather than the core financial viability needed to protect policyholders. For instance, while expanding operations and marketing are important for growth, they do not directly relate to the insurer's ability to pay claims. Similarly, customer service is essential for client satisfaction but does not influence the insurer's financial stability.