The minimum amount of policyholders' surplus required for a new insurer depends on which of the following factor?

The correct answer is C. Both A and B. Option C is correct because state insurance regulations tie minimum surplus requirements to both the organizational structure of the insurer (e.g., stock company vs. mutual company vs. reciprocal exchange) and the lines of insurance it intends to write (e.g., life, property…

Question

The minimum amount of policyholders’ surplus required for a new insurer depends on which of the following factor?

Options

Athe type of business organization being formed
Bthe lines of insurance to be written
CBoth A and B
DNeither A nor B

How the community answered

(18 responses)

A
6% (1)
B
11% (2)
C
78% (14)
D
6% (1)

Explanation

Option C is correct because state insurance regulations tie minimum surplus requirements to both the organizational structure of the insurer (e.g., stock company vs. mutual company vs. reciprocal exchange) and the lines of insurance it intends to write (e.g., life, property, liability), since each combination carries different risk profiles and capital needs.

Options A and B alone are each incomplete - neither factor in isolation is sufficient to determine the minimum surplus requirement, because regulators consider them together as a package when licensing a new insurer.

Memory tip: Think "both keys unlock the door" - you need the type of entity (A) AND the type of business (B) before a state can calculate how much surplus cushion is required. If either piece is missing, the calculation can't be done.

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