Surplus Allocation: An Oxymoron

In this paper we explore the concept of surplus allocation and demonstrate that it is an insurance oxymoron, a contradiction in terms. After the issue is defined, it is viewed and explored from four different points of view: technical, regulatory, investor- owner, and insurer management. In the course of this process, the fallacy of surplus allocation is demonstrated generally. We then discuss the implications of surplus allocation (knowing full well that however impossible the process may be, someone, somewhere, sometime, somehow will still do it) in a reductio ad absurdum vein. Concluding remarks are presented to provide additional perspective on the subject.