The financial cushion an insurance company sets in reserve that’s available to pay customer claims. The surplus is also a measure of the company’s financial strength and sustainability, once liabilities are subtracted from assets.
If you file an insurance claim with your carrier for an unexpectedly high amount, the surplus provides a way for your insurer to reimburse you for the damage or loss you’ve suffered, as long as it’s covered under the provisions of your insurance policy.
For example, if a spring storm pelts your home and high winds and hail cause $150,000 in damage—but you’ve paid less than that in premiums—the surplus held by the insurance company will make up the difference. This money can be invaluable at a time of great loss.