reserve deficiency

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Reserve Deficiency

A situation in which a company must meet some unexpected expenses, perhaps resulting in a shortage of cash. For example, a company may set aside a certain amount of funds to cover bad debt. If bad debt exceeds expectations, and the company must write off more funds than it intended, it is said to have a reserve deficiency. Reserve deficiencies reduce profits and may cause a problem with liquidity.

reserve deficiency

A shortage in funds set aside as a reserve for a specific purpose. For example, during a recession a firm may find the reserve fund covering allowance for bad debts deficient when the amount of bad debts exceeds expectations. A reserve deficiency will penalize the firm's profits if the firm has to set aside additional funds to offset the deficiency.
References in periodicals archive ?
Fitch said that inadequate pricing and unanticipated claims cost increases are in part revealed through loss reserve deficiencies. The commercial auto liability line has experienced annual unfavorable reserve development totaled greater than 7% of earned premiums for the last four consecutive years (2015-2018).
We've read recently in the press about insurance companies restating their earnings, having to recognize reserve deficiencies and just in our observations of clients, we're seeing smaller little control failures that aren't leading to any kind of major problems."
Underwriters have executed several rounds of significant underwriting and pricing actions in recent years, but claims severity challenges and reserve deficiencies limit near-term improvement prospects.
The BSP is also suspending the imposition of penalties on the smaller banks' legal reserve deficiencies, and is giving a moratorium without penalty on monthly payments due to the BSP for banks with ongoing rehabilitation programs.
Beyond loss severity trends, Fitch also points out that further loss reserve deficiencies continue to be a problem.
Best expects that Anadolu's technical performance will improve, as the company has addressed the resultant reserve deficiencies. Additionally, strong rate increases for motor third party liability business are expected to support Anadolu's technical results.
Consolidating financial institutions may also enjoy the following: Relocation of branches/offices within one year in cases of duplication of branches in certain areas; installment payment of outstanding penalties in legal reserve deficiencies and interest on overdrafts with the BSP over a one-year period; reasonable period to comply with real estate loan limits; restructuring past due obligations with BSP over a 10-year period; concurrent officership between a merged or consolidated bank and another financial institution, and concurrent directorship between banks, and continued effectivity of right or privilege under a rehabilitation program or any special authority granted by the Monetary Board.
These banks will also not be imposed of legal reserve deficiencies and will be granted a moratorium on monthly payments due to the BSP for banks under rehabilitation.
risk of further reserve deficiencies at Fondiaria Sai given its history
Henceforth, it was to be made a penalty rate for those banks who chose to borrow from the Federal Reserve to meet temporary reserve deficiencies as opposed to borrowing in the federal funds market.
Prior year's reserve deficiencies are now mainly funded.
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