Statutory Reserves


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.

BREAKING DOWN '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.

  1. Cash

    Legal tender or coins that can be used to exchange goods, debt ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
  3. Working Reserves

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

    Monetary reserves voluntarily held by insurance companies. Government ...
  5. Risk

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

    A class of financial metrics that is used to determine a company's ...
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