What Does Surplus to Policyholders Mean?
Surplus to policyholders is the net worth of an insurance company that is arrived at when its liabilities are deducted from its financial assets. This is a factor in assessing a company's strength. It is one of the components used when rating insurance companies.
Insuranceopedia Explains Surplus to Policyholders
A person should know the reputation of an insurance company before buying a policy from it. One way of doing this is by looking up the status of the company in a ratings organization.
The ratings organization rates an insurance company according to certain criteria. One of them is the surplus of policyholders. This criterion is important because it is through policyholders surplus that one can know whether a company can pay a huge number of claims within a short period of time. In short, it is the worth of a company's financial assets less its liabilities. Thus, it is an indicator of its solvency.