National Health Care Reform and Solvency Risk

Health insurance companies hold uncommitted assets, called surplus, for a number of reasons. In some cases, surplus is used to finance planned but unobligated capital expenditures such as information technology. But more fundamentally, companies hold surplus as financial protection against insolvency in the event of potential but unforeseeable costs, including rare events (such as an unusually harsh flu season) or unpredictable macroeconomic changes (such as the banking crisis that occurred in 2008). Surplus is distinguished from reserves, which are held against anticipated claims and related commitments.