Statutory reserve
In the business of insurance, statutory reserves are those assets an insurance company is legally required to maintain on its balance sheet with respect to the unmatured obligations (i.e., expected future claims) of the company. Statutory reserves are a type of actuarial reserve. Purpose Statutory reserves are intended to ensure that insurance companies are able to meet future obligations created by insurance policies. These reserves must be reported in statements filed with insurance regulatory bodies. They are calculated with a certain level of conservatism in order to protect policyholders and beneficiaries. Methods There are two types of methods for calculation of statutory reserves. Reserve methodology may be fully prescribed by law, which is often called formula-based reserving. This is in contrast to principles-based reserves, where actuaries are given latitude to use professional judgement in determining methodology and assumptions for reserve calculation. In the United States, where formula-based reserves are used, the National Association of Insurance Commissioners plans to implement principles-based reserves in 2017. Life insurance in the United States In the U.S. life insurance industry, statutory reserves are most commonly computed using the Commissioner's Reserve Valuation Method, or CRVM, the method prescribed by law for computing minimum required reserves. The