If we subtract liabilities of a policyholder-owned insurance company from its assets, we get the Policyholder surplus. The financial strength of a company can be determined through its Policyholder surplus as it indicates the financial ability of a company. If an insurance company needs to pay a higher than expected amount of claims, this surplus serves as an additional source of funds other than the company’s reserves and reinsurance. In the case of a publicly owned insurance company, the Policyholder surplus is known as shareholder’s equity.
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