Term Of The Day – Earned Surplus
Earned surplus for Workers Compensation insurance carriers, mutuals, captives, self-insureds, risk retention groups and captives, comes from the basic formula Assets = Liabilities + Capital. Once all claims and expenses are paid (liabilities) then the surplus can be paid out to shareholders as dividends. The Board of Directors may make a decision to retain the surplus and add it to each side of the accounting equation (Increase assets and capital). There are many state and federal laws on how this surplus should be handled.
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