Reserves are liabilities to the insurance company, representing funds set aside to meet the company’s contractual obligations. They are invested by the insurer and backed by assets of the company. Reserves are only subject to the creditors of the company after all contract owner claims have been resolved. This provides great safety to the contract owner, whose claim is placed ahead of bondholders and shareholders.
When overseen by state regulators, the balance between surplus an reserves provides a remarkable degree of safety, unparalleled in the investment world. Under careful monitoring and management by the NAIC, the insurance industry remains one of an elite group of industries not under the control of the federal government. This is, in large part, a result of the efficient solvency system currently in place.
Last Updated: 9/23/2012 10:05:00 PM