What does the term "surplus to policyholders" refer to?

The term "surplus to policyholders" refers to the remaining assets after liabilities are accounted for, which is the correct interpretation. In an insurance context, this surplus represents the financial health and stability of the insurance company. It exists after the insurer has settled all its obligations and liabilities, indicating that the company has sufficient resources to cover its policyholder commitments and potentially expand its operations or return value to policyholders.

This surplus can be utilized for various purposes, including reinvestment in the company, enhancing policyholder benefits, or serving as a financial buffer against future claims. The presence of a surplus is an important indicator for policyholders, demonstrating that the insurer has sound financial practices and can fulfill its future obligations to its customers.