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.

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 ?
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).
Without uncertainty, a given reserve deficiency will have the same implications as a settlement balance deficiency of the same magnitude.
Applicable Criteria and Related Research: Asbestos Losses: Continued Source of Reserve Deficiency
Sun Life's interest in Philippine power plants comes on the heels of concerns over a potential power shortage in the Luzon grid in the summer of next year, during which energy officials earlier warned of a reserve deficiency of 400 to 500 megawatts in the MarchtoMay period.
The bulk of the industry's total all lines non-A&E reserve deficiency is derived from accident years 2003 and prior; the total deficiency associated with these accident years is $26.
Yet, with the strengthening investment income and much of the reserve deficiency addressed, there will be increasing pressure within carriers to again compete actively for profitable segments of business.
Full browser ?