What Does Asset Valuation Reserve Mean?
Asset valuation reserves (AVR) are financial resources kept by a company for future use, especially in relation to unforeseen financial difficulties. Insurance companies are mandated to have AVR so they can afford to pay claims in the future.
Insuranceopedia Explains Asset Valuation Reserve
Banks and other financial institutions are legally mandated to have asset valuation reserve to protect their clients from being disenfranchised should these institutions run into fiscal problems.
Likewise, the National Association of Insurance Commissioners (NAIC) requires insurance companies in the United States to have asset valuation reserve to ensure that they will be able to pay the claims of their policyholders even if the company meets financial difficulties.
The reserve can be in the form of securities or real estate.