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📊 '''Mark to market''' is an accounting and valuation method used in the insurance industry to record assets — and in some cases liabilities — at their current market value rather than their original purchase price or amortized cost. Insurers hold vast [[Definition:Investment portfolio | investment portfolios]] comprising bonds, equities, real estate, and alternative assets, and mark-to-market accounting ensures that the [[Definition:Balance sheet | balance sheet]] reflects the economic reality of those holdings at the reporting date. The practice is central to financial transparency and is governed by standards such as [[Definition:International Financial Reporting Standards (IFRS) | IFRS]], [[Definition:US GAAP | US GAAP]], and the regulatory reporting frameworks that sit alongside them.

⚙️ Under mark-to-market rules, an insurer revalues its investment securities at each reporting period using observable market prices or, when liquid markets do not exist, model-based estimates (often called "mark to model"). In the United States, [[Definition:Statutory accounting principles (SAP) | statutory accounting]] as prescribed by the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] generally requires bonds held by life insurers to be carried at amortized cost while property-casualty carriers mark most equity holdings to market. Under [[Definition:Solvency II | Solvency II]] in Europe, both assets and [[Definition:Technical provisions | technical provisions]] are valued on a market-consistent basis, meaning mark-to-market thinking permeates the entire balance sheet. [[Definition:IFRS 17 | IFRS 17]], now effective in many jurisdictions including the UK, Canada, and parts of Asia, similarly requires market-consistent assumptions for discounting insurance liabilities. When market prices swing sharply — as during the 2008 financial crisis or the 2020 pandemic sell-off — mark-to-market revaluations can create significant volatility in reported [[Definition:Solvency ratio | solvency ratios]] and [[Definition:Shareholders' equity | shareholders' equity]], prompting regulators to consider countercyclical buffers or transitional relief.

💡 The importance of mark-to-market accounting in insurance extends well beyond bookkeeping. It directly influences [[Definition:Capital adequacy | capital adequacy]] calculations, [[Definition:Risk-based capital (RBC) | risk-based capital]] charges, and the perceived financial strength of a carrier — which in turn affects [[Definition:Credit rating | credit ratings]] and the cost of [[Definition:Reinsurance | reinsurance]]. For [[Definition:Insurtech | insurtech]] companies and newer market entrants carrying lighter investment portfolios, the impact may be smaller, but for large [[Definition:Life insurance | life insurers]] and [[Definition:Pension | pension]]-linked writers with long-duration asset-liability mismatches, mark-to-market swings can be material. Understanding when and how fair-value adjustments flow through income statements versus other comprehensive income is therefore essential for anyone analyzing insurer performance across different accounting regimes.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Fair value]]
* [[Definition:Statutory accounting principles (SAP)]]
* [[Definition:Solvency II]]
* [[Definition:IFRS 17]]
* [[Definition:Investment portfolio]]
* [[Definition:Unrealized gain or loss]]
{{Div col end}}

Definition:Mark to market - Revision history

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