Definitions for "Policy Reserves"
The funds that an insurance company is required to hold to pay benefits and obligations for the future. Insurance laws or regulations typically stipulate that reserves must be calculated so that the reserve amount is sufficient to cover all future claims.
The funds that an insurer sets aside specifically for the purpose of meeting its policy obligations, including the payment of proceeds in the future.
Policy reserves are one kind of the reserves set aside by an insurance company to meet future insurance obligations. Such reserves are mandatory under the Insurance Business Act and represent about 90% of an insurance company's liabilities. When underwriting insurance policies, the reserves must be sufficient to meet any foreseeable payments. In reality, insurance companies are unable to absorb all risks through policy reserves alone because interest rate and market volatility has caused the fund management environment to deteriorate. Insurance companies already set aside price fluctuation reserves to hedge investment risk. However, they are under pressure to review the levels of policy reserves, the principal reserve of an insurance company.
See "Actuarial liabilities".
Liabilities that represent the amount an insurer estimates it needs to pay policy benefits as they come due.