Equalization Reserve

Equalization Reserve

An account where an insurance company deposits funds to use in an emergency. That is, if an insurer finds itself in a position where it needs to pay more claims than it had anticipated, it may use funds from the equalization reserve to ensure that it fulfills its contractual obligations. An equalization reserve helps prevent any potential cash flow problems for the insurance company. It is especially useful in the event of an act of God, such as a flood or fire, where many policyholders live in the affected area. See also: Rainy day fund, Emergency fund.
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They have implemented important reforms to improve the governance and management of the Revenue Equalization Reserve Fund (RERF) and replenished the fund from the cash reserves.
The premium paid to SLIC has been protected through creation of Consolidated Claim Reserve Account (CCRA) in case of life insurance and Equalization Reserve Fund (ERF) with the provision of claw back approach in case of health insurance to safeguard unutilized premium amount.
In this regard, the company has approved transfer of an amount of Rs 5.00 billion to dividend equalization reserve from un-appropriated profits to maintain divide declarations.
However, as the banks build up a profit equalization reserve, which can be used to finance payouts during difficult years, depositors benefit from some protection of their returns during economic downturns.
The fourth in a series since 2013, the financing will assist in strengthening public financial management through improved governance of the country's sovereign wealth fund (known as the Revenue Equalization Reserve Fund (RERF)), and better reporting and monitoring of public debt and liabilities.
To absorb the Sfr2.95 billion in 9/11 claims, Swiss Re says it will use about Sfrl billion from its equalization reserves. The insurer is currently tangled in a legal conflict with the leaseholder of the World Trade Center, larry Silverstein, who maintains the towers were destroyed by two separate attacks and that he is therefore entitled to $7.1 billion for two claims under the terms of his insurance policy.
Company spokesman Christophe Dufraux stressed that the loss figure was before accounting for any release from Axa's equalization reserves, which some European insurers maintain to smooth the effect major losses might otherwise have on earnings.