What Does Policy Reserve Mean?
A policy reserve is the amount of money an insurer is required to maintain that is readily available to pay claims. As it is inevitable that claims will be made against some percentage of insurance policies written, insurers are required to maintain policy reserves. These reserves are specifically for events that have not yet happened but that could happen in the remainder of the life of the policy. Complex formulas devised by actuaries who analyze statistics are used to calculate the amount of reserve required.