What best defines earned surplus in insurance?

Earned surplus in insurance refers specifically to the portion of an insurer's surplus that has not been allocated to policyholders and represents the cumulative earnings that the company has retained, rather than distributed as dividends. This unassigned surplus acts as a buffer for the insurer against claims and expenses, contributing to financial stability and the ability to take on more risk.

When looking at the context of the other possible answers, the total assets and liabilities of an insurer are key components of its balance sheet but do not specifically define earned surplus. The assets represent everything the company owns, while liabilities reflect all its obligations. Net worth is a broader term that encompasses assets minus liabilities but does not isolate the unassigned funds which are critical in understanding the earned surplus. Thus, recognizing that earned surplus is specifically unassigned funds helps clarify its role in the financial operation of an insurance company.