Insurance reserves are accounting estimates of amounts an insurer needs to meet obligations under insurance contracts. They can include liabilities for reported but unpaid claims, unreported claims, or future benefits, depending on the business and accounting framework. They are not simply a separate cash box containing all collected premiums.
For a Nepalese insurer, reserve adequacy matters because claims may be paid long after premium collection. An actuary can help estimate long-term obligations and uncertainty. Reserves should be understood alongside solvency and assets: recognising a liability does not by itself establish that sufficient resources are available to pay it.