Reply To: Reserve Strain
tanmay
Reserve strain occurs when an insurer holds an amount in reserve that is greater than the single premium that the insurer actually received. This extra reserve strain comes out of the insurer’s own surplus capital and can be released over time.
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Isn’t it same as same as New business strain?
Definition: New business strain is the strain on the business created due to inadequate premium amounts in initial years, which are not enough to cover for the expenses, commissions and statutory reserves.
Description: In insurance, the expenses are front ended whereas returns are realized over time. However, with the premium payments being received over the contract term, this strain tends to get reduced.