In an insurer examination, who bears the costs of the examination?

• A. Policyholders
• B. The insurer being examined
• C. The state
• D. The reinsurer

Answer: (B)

Regulatory examinations are funded by the entity being examined. When a state insurance department conducts a financial or market-conduct review, it bills the insurer under examination for the costs of the examination—often through a formal invoice or an established fee schedule. This setup ensures that the regulator’s oversight is supported by the industry it regulates, and it keeps policyholders from bearing the examination expense. The reinsurer wouldn’t typically pay unless there’s a specific arrangement, and the state funds its own operations through public funds, not by charging policyholders directly. So the embodiment of who bears the costs is the insurer being examined.