What does PHS mean in ACCOUNTING
Policy Holders' Surplus (PHS) is a key financial measure for policyholders of an insurance company. This financial indicator shows the total amount of money that is added to the policyholder's side in case there is excess capital left over after the insurer has paid all claims and expenses related to their insurance policies. PHS is typically measured on a yearly basis to provide a comprehensive understanding of the financial standing of the insurance company, while helping policyholders make informed decisions about their investments.
PHS meaning in Accounting in Business
PHS mostly used in an acronym Accounting in Category Business that means Policy Holders' Surplus
Shorthand: PHS,
Full Form: Policy Holders' Surplus
For more information of "Policy Holders' Surplus", see the section below.
» Business » Accounting
Definition
Policy Holders' Surplus (PHS) reflects the current financial position and strength of an insurance company. It indicates how much surplus, or excess funds, available for each policyholder beyond what it needs to pay its current claims and expenses. The higher this surplus, the better protected the policyholders are against any unanticipated losses that may arise in the future due to changing market conditions or other unexpected events. PHS also helps insurers set prices for their policies based on their risk assessment and ensure that the premiums collected from each individual customer are enough to cover all potential costs related to each insured event.
Calculating PHS
Calculating Policy Holder's Surplus can be done by subtracting liabilities from assets, where liabilities consist of amounts owed for claims already settled as well as those estimated to be pending, while assets include cash reserves, investments held in portfolios and other liquid assets as well as expected future income from premiums received by customers. The resulting amount is known as Policy Holder's Surplus which should remain positive for an insurance company to continue operating profitably.
Benefits
By measuring Policy Holders' Surplus (PHS), insurers can evaluate how sound and strong they are financially by comparing their surplus assets against liable expenses with respect to existing customers and policies taken out by new customers in order to make sure that there won’t be any problems when settling on customer claims in the future. A healthy level of PHS also helps insurers attract new customers by creating trust within them regarding safety of their investments with such companies. Furthermore, high levels of PHS could also lead to lower premiums due from customers since fewer risks are associated with such companies owing to large increase in surplus funds relative to claims & expenses ratio; thus providing better value for money and service quality per dollar spent than might have been previously available elsewhere.
Essential Questions and Answers on Policy Holders' Surplus in "BUSINESS»ACCOUNTING"
What is Policy Holders' Surplus (PHS)?
Policy Holders' Surplus (PHS) is an additional fund created by insurance companies to help protect their policy holders in the event of a financial emergency. PHS acts as an extra layer of protection, in addition to the premiums and reserves that are kept by the company, and is available to cover liability claims or losses due to unforeseen circumstances.
How does PHS benefit insurance companies?
By creating a separate fund specifically for policyholder protection, the insurance company can better manage their risk and ensure that they have enough available resources to meet any potential claims or losses. This helps them remain financially stable and able to provide coverage when needed.
Who owns PHS?
While it's ultimately managed by the insurance company, the funds within PHS belong solely to the policyholders. They are maintained separately from other funds held by the company and cannot be accessed by it without approval from regulators.
Can I access PHS funds?
No, PHS funds cannot be accessed directly by policyholders under any circumstances. Only authorized representatives of the company can access these funds if necessary.
Is there a limit on how much money can be stored in PHS?
Yes, there is a limit imposed on each insurance company based on its size and risk profile. Regulators review this limit periodically to ensure it remains appropriate for each insurer's needs.
How do I know how much PHS my insurer has set aside?
Your insurer will provide you with some basic information regarding their level of surplus when you sign up for coverage. You can also check with your state's insurance regulator if you would like more detailed information about your specific insurer's surplus levels.
What happens if an insurer's PHS runs out?
If an insurance company is unable to meet their financial obligations due to inadequate funding in their Policy Holders' Surplus account, they will typically be required to liquidate assets or seek external assistance from another entity such as a reinsurer or government organization in order to continue operations.
When should I be concerned about my insurer's level of surplus?
Generally speaking you do not need to worry unless your insurer falls below regulatory requirements for minimum surplus levels. Your state's department of Insurance will monitor this so rest assured that if there is cause for concern they will take action quickly.
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