reserve deficiency

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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Although there has been no material adverse development reported since the third quarter of 2017, AM Best continues to incorporate a reserve deficiency in its view of AmTrust's risk-adjusted capitalization.
These instances of severe power reserve deficiency would translate to higher electricity rates due to an increase in wholesale electricity spot market (WESM) prices, Meralco senior vice president and head of utility economics Larry Fernandez said.
"We believe the rising loss costs have led to an overall reserve deficiency for the commercial auto line," Moody's said.
industry's asbestos reserve deficiency is in the range of $8 billion-$16 billion at year-end 2017.
On September 3, 2018, the Independent System Operator for New England (ISO-NE) declared such an event when sudden outages at two large natural gas units combined with higher than forecast power demand resulted in an operating reserve deficiency or scarcity event.
The level of reserve deficiency reported by ASNIC generates further concern regarding management's understanding and estimation of its liabilities.
In 2005, the commission placed PPSTA under conservatorship to address its reserve deficiency and preserve its assets.
Among the lines falling further into reserve deficiency were Workers' Compensation and Financial Guaranty.
Among the lines falling further into reserve deficiency 2012 are Workers' Compensation and Financial Guaranty.
Best's January 2006 Review/Preview, "For some [carriers], a 25 percent reserve deficiency could render an insurer technically insolvent"
Competition for "good" workers compensation risk in other states will build now that much of the reserve deficiency has been funded and accident year results for 2004 through 2007 have been profitable.
The Board also approved a related technical amendment to the reserve deficiency penalty provision of Regulation D (Reserve Requirements of Depository Institutions).
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