Life insurance liability reserve

Insurance liability reserve refers to a kind of fund reserve drawn from premium income by insurance companies to undertake unexpired liabilities and deal with outstanding claims. The insurance liability reserve is not the operating income of the insurance company, but the liability of the insurance company, so the insurance company should be backed by assets equivalent to the insurance liability reserve and be ready to perform the insurance liability at any time.

China's insurance liability reserve is different due to the nature of insurance, which is usually divided into life insurance liability reserve and non-life insurance liability reserve.

Life insurance liability reserve refers to the funds paid by insurance companies for future insurance liabilities. 80%-90% of the liabilities of life insurance companies are life insurance liability reserve liabilities, and small changes in actuarial assumptions or changes in reserve evaluation methods will have a great impact on the income and company value in a certain period.

The composition of life insurance liability reserve includes four parts: prepaid premium, expense reserve, policy interest, special dividend reserve and universal smoothing reserve.

Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.