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. Risk

    The chance that an investment's actual return will be different ...
  4. Liquidity Ratios

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

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

    Legal tender or coins that can be used in exchange goods, debt, ...
Related Articles
  1. A Look At Single-Premium Life Insurance
    Home & Auto

    A Look At Single-Premium Life Insurance

  2. How An Insurance Company Determines ...
    Home & Auto

    How An Insurance Company Determines ...

  3. Deducting Your Donations
    Taxes

    Deducting Your Donations

  4. Introduction To Social Security
    Retirement

    Introduction To Social Security

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center