What does Net Liabilities to Policyholders' Surplus mean? Read on to discover the definition & meaning of the term Net Liabilities to Policyholders' Surplus - to help you better understand the language used in insurance policies.
Net Liabilities to Policyholders' Surplus
Net liabilities to policyholders' surplus is an evaluative ratio that measures an insurance company's capability to meet its estimated future liabilities. Net liabilities include unearned premiums, unpaid claims, and reserve estimation errors, while policyholders' surplus refers basically to net worth. The ratio of the two indicates how well an insurance company has made provision in reserves for future claims and whether the company is already dipping into the surplus to cover losses, which should actually be paid from the loss reserves.
We hope the you have a better understanding of the meaning of Net Liabilities to Policyholders' Surplus.