Which statement regarding insolvency is TRUE?

Insolvency in the insurance context refers to the inability of an insurer to meet its financial obligations as they come due. The correct statement emphasizes that an insurer cannot simply escape insolvency by meeting its liabilities alone. This underscores the fact that insolvency is measured not just by immediate liabilities, but also by the overall financial health and ability of the insurer to remain solvent over time.

Having sufficient assets to meet current liabilities is essential, but if an insurer's overall financial structure (including reserves, capital requirements, and future obligations) is insufficient, it still faces insolvency, regardless of whether it can meet current claims. The complex nature of insurance finances means that simply fulfilling immediate obligations does not restore solvency. Financial stability encompasses a broader threat assessment and long-term viability beyond merely paying debts as they arise.

Other options suggest that an insurer can escape insolvency through various means such as reinsurance or fulfilling its obligations, which oversimplifies the situation. True solvency relies on a comprehensive assessment of the insurer's financial position and its ability to meet not just current liabilities but also future obligations and risks.