Glossary

Policyholder surplus

An insurer's assets minus its liabilities under statutory accounting, the capital cushion that absorbs losses beyond its reserves and premiums.

Also called: surplus, capital and surplus, statutory surplus, policyholders' surplus, risk-based capital

Policyholder surplus is the difference between an insurer's assets and its liabilities under the accounting rules regulators require. The liabilities are mostly reserves for claims not yet paid and unearned premium. What remains is the cushion that absorbs losses beyond what premiums and reserves were expected to cover, such as a bad hurricane season. It is also called capital and surplus.

Say an insurer has $1.5 billion in assets and $1.1 billion in liabilities. Its surplus is $400 million. If a catastrophe leaves it with a $100 million net loss after reinsurance, a quarter of the cushion is gone. Regulators set minimum capital with risk-based capital formulas, which require more surplus from insurers that take more risk, and they can intervene when surplus falls below set action levels. Rating agencies compare surplus to premium written and to catastrophe exposure.

Do not confuse it with surplus lines, the market for risks standard insurers decline, which is a different use of the word. For a homeowner, a company with a thin surplus relative to its premium and its storm exposure is more likely to struggle after a major event, and failure puts you in the hands of a receiver and your state's guaranty fund. Check the carrier's rating and date, and read Financial strength ratings: AM Best, S&P, Moody's and Demotech and what happens if your home insurer goes insolvent.

Last reviewed October 10, 2026

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Related terms

Financial strength rating An independent agency's grade of an insurer's ability to meet its obligations and pay claims, issued by firms such as AM Best, S&P, Moody's, Fitch and Demotech. AM Best rating The letter grade, from A++ to D, that the insurance rating agency AM Best assigns to an insurer's ability to meet its ongoing policy obligations. Insolvency The condition of an insurer that cannot pay its claims and debts as they come due, or whose liabilities exceed its assets or required capital. Guaranty fund A state safety net, financed by charges on licensed insurers, that pays covered claims up to a cap when an insurer is declared insolvent. Reinsurance Insurance that an insurance company buys from other companies, which reimburse part of its claim payments, especially after a large disaster. Receivership A court-supervised takeover of a troubled insurer, run by the state's insurance regulator or a designee, to either repair the company or wind it down.

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Related insurers

Stillwater Insurance Group Jacksonville insurer, once Fidelity National's P&C arm, selling homeowners in most states via agents and partners; California is about half its premium.