Adjusted Liabilities
It's an insurance industry term. Insurance companies are liable for the damages they cover. They have assets...usually invested in bonds and stocks. And there is a kind of minimum coverage ratio they must maintain for the assets they have relative to the total liabilities they might suffer if, in fact, that earthquake and pestilence that goes with it...all happen.
They have a maintenance reserve, i.e. a basic 'always having to pay' maintenance amount for regular claims that happen all the time; and then there's an asset reserve...like if they have to sell off assets to pay for Johnny's very poor car parking job that ended with the SUV in the pool.
Why do these ratios matter? Because they reflect how financially healthy an insurance company is. The numbers are used for both investors and, for some, marketing. That is, if you're buying some form of variable life insurance policy, which is likely not to trigger for 25 years when you drive your Ferrari into a wall...you want to be sure that your insurance company is around, so that your grandkids have at least something. A financially strong insurance company should give policy-buyers at least some comfort in The Long Cold Sleep coming.
Related or Semi-related Video
Finance: What is Contingent Liability?4 Views
Finance allah shmoop what is contingent liability All right you
know what a liability is right It's a debt it's
a promise you've made that you need to fulfill teo
pay someone and fulfilling it can be done with cash
or ah promise of delivering inventory or after you've sold
the home to the joneses An interesting family with oddly
large foreheads you know delivering good title to the home
to them right So you're fulfilling liability of producing your
home so what's a contingent liability Well think of it
is a call option or a put option on a
security A contingent liability is a derivative of some other
underlying being like another liability Well the most common contingent
liability would be a filed lawsuit that is more than
just an ambulance chasing securities lawyer hoping to get a
quick five hundred grand to go away google might be
willing to pay three billion dollars toe by ring That
wireless doorbell company started by some weirdo contingent upon ring
properly defending its lawsuit from honeywell which claims that they
own the patents on the process while the financial outcome
of that lawsuit is a contingent liability to the company
Ring and the outcome of the joneses moving into town
well is a worldwide dominance and the enslavement of all
human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice
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