How to calculate the loss reserve adequacy ratio of insurance companies

Adequacy ratio = (loss reserve balance/demand reserve) × 100%. The insurance company's loss reserve adequacy ratio is an index to measure whether the insurance company's loss reserve is sufficient to deal with risks and claims. The higher the adequacy ratio, the more it means that the company's loss reserve is enough to cover the claim risk, otherwise it is insufficient, so it is necessary to calculate the balance of loss reserve and demand reserve.