What is the primary goal of technical reserves for an insurer?

The primary goal of technical reserves for an insurer is to cover all outstanding underwriting liabilities. Technical reserves are crucial because they ensure that an insurance company has enough funds set aside to meet its obligations to policyholders for claims that have been incurred but not yet paid, as well as for future policyholder claims. This includes not only the known claims that are in process but also claims that may arise from the risk exposures that the insurer has underwritten during the policy period.

By accurately estimating and maintaining technical reserves, insurers can effectively manage their financial stability and solvency. This practice aligns with regulatory requirements and ensures that the insurer can meet its commitments, thereby protecting the interests of policyholders. In contrast, funds used for marketing and advertising, profit distributions to shareholders, or business expansions are not directly related to the insurer's obligation to pay claims and thus do not fall within the purpose of technical reserves.