Businesses can assess their financials using a balance sheet. For property and casualty insurance companies, there are three major sections of the balance sheet: assets, liabilities, and policyholders' surplus. Assets usually include investments and retained earnings. The liabilities however are a bit more complex. Property and casualty insurance companies are required to maintain certain reserves. These reserves remain a liability for a period of time depending upon the type of reserve - unearned premium reserve or loss reserves.

Why are property and casualty insurance companies required to maintain loss reserves? How do loss reserves impact an insurance company's balance sheet?

Answer rating: 100% (QA)

Property and casualty insurance companies are required to maintain loss reserves to ensure they have sufficient funds to cover future claims and relat... View the full answer