What Does Development to Policyholder Surplus Mean?
Development to policyholder surplus refers to the relationship between an insurance company's loss reserves—an estimate of an insurance company's future liabilities from claims—and policyholder surplus or net worth—the difference between its admitted assets and its liabilities. It identifies whether the company has set enough aside funds as loss reserves and whether they have understated or overstated their net worth.
Insuranceopedia Explains Development to Policyholder Surplus
Regulators closely monitor insurance companies to ensure they are not at risk of becoming insolvent, and one way they keep an eye on them is with financial ratios. The development to policyholder surplus is one such important ratio, and regulators keep track of it over a period of time. Therefore, insurance companies typically manage their loss reserves to keep this ratio from seeming unusual and drawing unwanted attention.