Final answer:
A regulatory exemption occurs when a state insurance commissioner allows a company to deviate from what is required in the Accounting and Practices Procedures manual or in state law.
Step-by-step explanation:
When a state insurance commissioner allows a company to deviate from what is required in the Accounting and Practices Procedures manual, or in state law, this is an example of a regulatory exemption.
A regulatory exemption occurs when regulators grant permission to a company to not comply with certain requirements. It is typically granted in specific circumstances where strict adherence to the regulations may be impractical or unnecessary.
For example, if a company can demonstrate that following a specific accounting practice would be overly burdensome or not in the best interest of policyholders, the insurance commissioner may allow an exemption.