Valuation Reserve

DEFINITION of 'Valuation Reserve'

The funds set aside by life insurers as required by state law to compensate for declines in the value of investment instruments that are held by the insurance company as assets. Valuation reserves are required because life insurance contracts can be in effect for long periods of time, and the securities valuation reserve is intended to protect the company's loss reserves in the event that the insurer's investments are under-performing.

BREAKING DOWN 'Valuation Reserve'

Prior to 1992, the mandatory securities valuation reserve (MSVR) required a liability reserve to be maintained by the National Association of Insurance Commissioners (NAIC) to protect against value changes in an insurance company's securities investments. Following 1992, the requirements set forth by the MSVR were transferred into the asset valuation reserve.

RELATED TERMS
  1. Valuation Premium

    The rate set by a life insurance company based on the value of ...
  2. Loss Reserve

    An estimate of an insurer’s liability from future claims. Loss ...
  3. Conditional Reserves

    Surplus reserves held by insurance companies that are treated ...
  4. Asset Valuation Reserve - AVR

    Capital required to be set aside in order to cover a company ...
  5. Finite Risk Insurance

    An insurance contract in which the insured provides a pool of ...
  6. Losses and Loss-Adjustment Expense

    The portion of an insurance company’s reserves set aside for ...
Related Articles
  1. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  2. Personal Finance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  3. Personal Finance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  4. Personal Finance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  5. Personal Finance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  6. Personal Finance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  7. Personal Finance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  8. Retirement

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  9. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  10. Investing

    3 Reasons to Avoid Term Insurance

    Find out the reasons why term life insurance may not be for everybody, and why you may want to avoid it in favor of a permanent life insurance policy.
RELATED FAQS
  1. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  2. Why should value investors consider the insurance sector?

    Discover why value investors should consider the insurance sector. Value investors look for extremes in valuation and sentiment ... Read Answer >>
  3. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  4. What level of reserve ratios is typical for an insurance company to protect against ...

    Read about the NAIC-inspired risk-based capital, or RBC, requirements imposed on American insurance companies to safeguard ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ... Read Answer >>
Trading Center