retrospective reserve

  • One method of calculating the reserve in life insurance is to take the difference between the premium collected in the past and the claims to the policyholder already paid. Such a calculation will show any surplus of the premiums on hand, which is the valuation of the reserve retrospectively. A distinction should be made between a retrospective reserve and a prospective reserve. The chief difference is that the retrospective reserve receives the accumulation of the premium backward, whereas the prospective reserve is the viewpoint of looking forward to requirements in the future.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­www.irs.gov/­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).