Equalization reserve
The equalization reserve is an actuarial reserve . It must be created for property and casualty insurance and reinsurance . There is no equalization reserve to be set up for the life and health insurance business and accident insurance operated by life insurers.
It serves to compensate for fluctuations in the claims experience in future years if these are probable based on experience in the insurance branch in question, the fluctuations are not compensated for by premiums or the reinsurance cover absorbs the fluctuations in the claims experience.
Insurance branches that show high fluctuations in the claims history of the current accounting period despite a homogeneous insurance portfolio, achieve a stabilization of their results by adding to the equalization reserve in good years or withdrawing from the equalization reserve in bad years. In hail insurance there are z. B. hardly any damage in many years. On the other hand, there are years with enormous hail damage that cannot be covered by the year's premium income. The equalization reserve thus serves to compensate for the different damage incurred in the individual years.
The legal basis for the formation of the equalization reserve are § 341h HGB , § 29 RechVersV and the rechversv RechVersV. The calculation of the equalization reserve is based on an algorithm that is specified in the annex to Section 29 RechVersV.
The equalization reserve is calculated separately for each insurance class. The insurance classes that are obliged to prepare and report separate actuarial profit and loss accounts to the supervisory authority according to RechVersV are to be treated as separate insurance classes.
A claims equalization reserve is to be set up if the following three conditions are cumulatively met:
- De minimis clause: The insurance branch has earned more than € 125,000 in premiums on average over the past three years.
- Significance clause: The standard deviation of the loss ratio in the observation period (15 or 30 years depending on the insurance class) is at least 5%.
- Financing requirement clause: During the observation period, the combined ratio exceeds 100%, i.e. H. the contributions earned in the financial year are at least once insufficient to cover the sum of expenses for insurance claims and expenses for insurance operations.
In a year with an under-loss (loss rate for the financial year is below the average loss rate for the observation period), amounts are added to the equalization reserve. In a year with overcharging (the loss rate for the financial year is above the average loss rate for the observation period), amounts are withdrawn, unless an addition is necessary to reach the target amount of the provision.
Provisions similar to the equalization reserve
For risks that already cover high losses in a single insured event, but occur very rarely, "similar provisions" must be set up under the equalization provision. In the event of a claim, the risk cannot be covered by the insurance premium for a single year; compensation can only take place in an indefinite period of time.
According to Section 30 RechVersV, provisions similar to the equalization reserve must be created in particular:
- Pharmaceutical provision,
- Nuclear reserve,
- Terrorism Risk Provision.
This list is not to be regarded as conclusive. A provision must also be made here for other major risks (e.g. earthquakes ). Such major risks are characterized by a low loss frequency combined with a high loss amount.
Considerations beyond HGB / RechVersV
A claims equalization reserve may not be recognized under IFRS , as it does not represent any liability within the meaning of the IFRS framework .
Individual evidence
- ↑ Equalization reserve. Retrieved July 15, 2019 .
