Statutory Surplus

What Does Statutory Surplus Mean?

A statutory surplus refers to the funds remaining after an insurance regulatory board’s accounting system deducts a company’s liabilities from its assets. This surplus is intended to cover potential future losses the company may incur.

Insuranceopedia Explains Statutory Surplus

Insurance regulators implement a strict accounting system for the industry to protect the coverage of insured individuals. When an insurance company becomes insolvent, it not only impacts the company but also jeopardizes the financial security of its policyholders.

As a result, regulators regularly monitor the financial health of insurance companies. When a company generates a profit, state regulators may require that a portion of the gains be reserved as protection against potential future losses.