Policyholder Dividend — Participating Policy
Distributing a share of the insurer's surplus to participating policyholders.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Policyholders' Dividend Expense | Expense (+) | 200,000.00 | - |
| Dividends Payable (Policyholders) | Liability (+) | - | 200,000.00 |
💡 Accountant's Note
Participating policies entitle holders to share in the insurer's investment and mortality surplus. The dividend is declared annually and can be paid in cash, used to buy additional cover, or left to accumulate with interest.
Practitioner & Systems Framework
💻 ERP Architecture
Policyholder dividends (bonuses) are declared by the Board following the actuarial valuation and surplus distribution analysis. The bonus rate per sum assured is configured in the life policy admin system, which calculates the total bonus for each eligible policy. Policyholders are notified of their bonus via the annual statement. In the GL, the bonus is recognised as an expense and a liability (dividends payable). The liability is cleared when the bonus is paid in cash, applied to reduce premiums, or added to the sum assured (reversionary bonus).
⚠️ Audit Flags
Auditors verify that the surplus available for distribution has been correctly calculated by the actuary and that the declared dividend does not impair the insurer's minimum solvency margin. The dividend policy must comply with regulatory requirements — some regulators require approval of the dividend declaration. Test that all eligible participating policies have received the correct bonus amount. Confirm that the policyholder's chosen option (cash, reduction of premium, additional coverage) has been correctly implemented in the policy admin system.
📄 Required Documentation
Board resolution declaring the bonus rate, actuarial surplus analysis confirming the distributable surplus, policyholder bonus calculation schedule, individual policy bonus certificates, solvency margin calculation post-dividend, and regulatory approval (if required).
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