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 ?
Best expects that Anadolu's technical performance will improve, as the company has addressed the resultant reserve deficiencies.
A.M. Best Affirms credit ratings of Milli Reasurans Turk Anonim Sirketi
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.
BSP adds perks for MandAs in banking industry
By the end of 2015, the Tower Group reported additional loss reserve deficiencies well above $400 million.
Canada,United States : CastlePoint National conserved by regulator to protect policyholders
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.
BSP grants bank relief measures
In the next five years, Guy Carpenter said there is potential for reserve deficiencies to play an important role.
Reinsurance pricing drops: Guy Carpenter reports that rates for January renewals fell 11%
risk of further reserve deficiencies at Fondiaria Sai given its history
Moody's places Unipol Group's ratings on review for downgrade
Prior year's reserve deficiencies are now mainly funded.
As competition heats up prices decline for commercial lines
Given the significant reserve deficiencies that Lincoln has exhibited, A.
A.M. Best downgrades Kingsway, subsidiaries
Flagging reserve deficiencies is a thankless task, however.
Risk managing workers' comp reserves
Fitch believes that these reserve deficiencies to a large degree reflect implicit loss-reserve discounting by insurers of their workers' comp business," the report said.
Peering into pricing's crystal ball: frequency of claims continues to decline but their severity has increased steadily since the mid-1990s, Fitch Ratings reports. Health care costs have steadily increased as well. The Fitch report said that litigation cost increases related to workers' comp have also affected loss-cost trends
The Board also is amending the penalty provision of Regulation D, which is calculated based on the discount rate, to conform the calculation of penalties for reserve deficiencies to the new discount rate framework.
Final rule--amendment to regulations A and D. (Legal Developments)
Sometimes this is actually the case, particularly where the company (or a generous parent) has made up severe loss reserve deficiencies.
M&A Deal Busters in the Insurance Industry
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