YOU ASK:
What is the definition of Policyholders’ Surplus?
WE ANSWER:
The Policyholders' Surplus refers to the monetary amount left after the difference between the assets and liabilities of an insurance company is taken out. Liabilities include all the benefits payable to the company's policyholders. The surplus also includes special voluntary reserves as well as paid-up capital.
The surplus acts as an additional safeguard, above and beyond the company's reserves. This acts to protect against a large number of claims should a catastrophic or unexpected event happen.
Insurance companies are always mindful of this, as well as other performance ratios that show liquidity, since the ability to promptly pay benefit claims is important to players in the insurance industry.
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