Market value surplus (MVS) of an insurer =

• A. policyholders' surplus
• B. fair value of assets - fair value of liabilities
• C. fair value of liabilities - fair value of assets
• D. statutory surplus

Answer: (B)

Market value surplus measures an insurer’s net worth using current market values. It is the difference between the fair value of assets and the fair value of liabilities, reflecting what the company would be worth if assets were sold and liabilities settled at today’s prices. This is why the expression assets minus liabilities is the correct definition. This contrasts with policyholders’ surplus and statutory surplus, which are based on regulatory accounting values rather than market-based values. Subtracting in the opposite order would invert the sign, so liabilities minus assets is not correct.