Statutory Reserves

AAA

DEFINITION of 'Statutory Reserves'

State regulated reserve requirements. Insurance companies must hold a portion of their assets as either cash or marketable investments. Statutory reserves are the amount of liquid assets that firms must hold in order to remain solvent and attain partial protection against a substantial investment loss. Holding reserves reduces the risk of insurance.

INVESTOPEDIA EXPLAINS 'Statutory Reserves'

Statutory reserves lead insurance companies to lose some potential profits as they are unable to invest these funds into mutual funds or other forms of high yield investments. However, holding reserves increases investor confidence that the company will be able to fulfill its commitment in a bear market. Some insurance companies hold additional capital, voluntary reserves.

RELATED TERMS
  1. Working Reserves

    Reserves held by banks above the required minimum level - or ...
  2. Voluntary Reserve

    Monetary reserves voluntarily held by insurance companies. Government ...
  3. Liquidity Ratios

    A class of financial metrics that is used to determine a company's ...
  4. Degree Of Relative Liquidity - ...

    A liquidity metric that looks at a company's ability to support ...
  5. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  6. Current Ratio

    A liquidity ratio that measures a company's ability to pay short-term ...
Related Articles
  1. Home & Auto

    A Look At Single-Premium Life Insurance

    Want to provide for your dependents and finance your own long-term care? Learn more here.
  2. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  3. Taxes

    Deducting Your Donations

    Generosity may be its own reward, but some charitable giving also provides personal tax benefits.
  4. Retirement

    Introduction To Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  5. Options & Futures

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  6. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  7. Investing Basics

    When do companies publish P&L statements?

    Understand what a company's P&L statement represents, and find out when companies traditionally publish these statements.
  8. Active Trading Fundamentals

    What is liquidity management?

    Take a look at the different definitions of liquidity, and find out how investors and businesses attempt to reduce exposure to liquidity risk.
  9. Fundamental Analysis

    What is the difference between operating income and revenue?

    Understand the definitions of revenue and operating income, how they are calculated and interpreted, and how operating income is derived from revenue.
  10. Fundamental Analysis

    What is the difference between gross margin and gross profit?

    Understand the difference in definitions between gross margin and gross profit, and learn what each represents as a metric of a company's profitability.

You May Also Like

Hot Definitions
  1. Marketable Security

    Any equity or debt instrument that it readily salable and can be converted into cash, or exchanged with ease. Stocks, bonds, ...
  2. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would ...
  3. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  4. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  5. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  6. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
Trading Center