What type of reserve is maintained according to insurance laws established by states?

The type of reserve maintained according to insurance laws established by states is known as the legal reserve. This reserve is a requirement set by state regulations to ensure that insurance companies have sufficient funds to pay future claims. Legal reserves are calculated based on the policies issued and reflect the insurance company's obligations to policyholders.

These reserves help demonstrate the financial strength and stability of the insurer, as they are legally mandated to meet specific criteria and ratios. By maintaining a legal reserve, insurers protect themselves against insolvency and reassure policyholders that they can fulfill their contractual obligations.

Organizations must also adhere to other types of reserves, but these are not legally required by state law, which distinguishes the legal reserve as a critical concept in the regulatory framework governing life and health insurance.