Net Liabilities to Policyholder Surplus

Net liabilities expressed as a ratio to policyholder surplus. Net liabilities equal total liabilities less conditional reserves, plus encumbrances on real estate, less the smaller of receivables from or payable to affiliates. This ratio measures company's exposures to errors of estimation in its loss reserves and all other liabilities. Loss-reserve leverage is generally the key component of net liability leverage. The higher the loss-reserve leverage the more critical a company's solvency depends upon maintaining reserve adequacy.

See Also: Net Premiums Written to Policyholder Surplus (IRIS); Nonstandard Auto (High Risk Auto or Substandard Auto); Net Underwriting Income; Net Premiums Written; Net Premiums Earned; Net Premium;

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