Premium to Surplus Ratio

This ratio is designed to measure the ability of the insurer to absorb above-average losses and the insurer's financial strength. The ratio is computed by dividing net premiums written by surplus. An insurance company's surplus is the amount by which assets exceed liabilities. The ratio is computed by dividing net premiums written by surplus. For example, a company with $2 in net premiums written for every $1 of surplus has a 2-to-1 premium to surplus ratio. The lower the ratio, the greater the company's financial strength. State regulators have established a premium-to-surplus ratio of no higher than 3-to-1 as a guideline.

See Also: Physical therapy; Profit; Private-Passenger Auto Insurance Policyholder Risk Profile; Pretax Return on Revenue; Pretax Operating Income; Premium Unearned; Premium Earned; Preferred Auto; Pre-existing conditions provision;

Get our Quick Quotes: Auto Quick Quote Home Quick Quote Life Quick Quote Health Quick Quote and Apply Online Travel Quick Quote and Purchase Online Insurance in California