What term refers to the funds set aside by insurers to cover future claims?

The term that refers to the funds set aside by insurers to cover future claims is "reserve funds." These funds are crucial for an insurance company as they ensure that there is enough capital available to meet future policyholder obligations, such as claims payments. Insurance companies are required to maintain adequate reserves to fulfill their contractual liabilities, which is essential for financial stability and regulatory compliance.

Reserve funds represent a liability on the insurer's balance sheet and are calculated based on actuarial predictions of future claims, taking into account factors such as historical data, expected loss trends, and the specific terms and conditions of the insurance policies issued. This careful financial management helps protect the interests of policyholders and guarantees that claims can be paid when they arise.

While surplus reserves, claim funds, and contingency funds may seem relevant, they do not specifically define the set-aside funds for future claims in the same way that reserve funds do. Surplus reserves generally refer to additional reserves held beyond the required minimum, while claim funds might imply money being actively used for current claims. Contingency funds are typically associated with unexpected expenses rather than being strictly earmarked for the insurer’s claims obligations.