If a company decides to exit the market for a particular line (consider when State Farm began the process of exiting the Florida homeowner market as an example), it would need such a reserve since it'll have claim settlement activities without any offsetting new premium to pay for such services.
Since Statutory Accounting Principles consider the situation of a company's ability to pay it's claims in the event that it stops all operations (not necessarily as the result of insolvency), a company might very well calculate such a reserve.
__________________
The Search is about to begin . . . There is still time left to join.
I find your lack of faith disturbing.
Wait until you have kids. 
  Freedom of speech is not a license to discourtesy
|
06-14-2012, 10:32 PM
Linear Mode
