What term describes the amount of liquid assets an insurer must maintain to satisfy future obligations to its policyholders?

The correct term that describes the amount of liquid assets an insurer must maintain to satisfy future obligations to its policyholders is "reserves." Reserves are essentially funds set aside by an insurance company to cover future claims, ensuring that the insurer can meet its promises to policyholders when those claims arise. This is a crucial aspect of an insurer’s financial management, as it ensures that they remain solvent and capable of fulfilling their contractual obligations.

Reserves are specifically calculated based on actuarial assessments of future claims, ensuring that the insurer has a reliable estimate that reflects expected liabilities. By maintaining adequate reserves, insurers can instill trust in policyholders that their claims will be paid promptly and fully.

In the context of insurance, it’s differentiated from other terms like liabilities, which refers to the total obligations of the company that extend beyond just claims. Surplus indicates the excess of assets over liabilities, representing the financial health of the company but doesn't denote the specific liquid assets needed for future claims. Equity represents the owner's interest in the company and does not directly relate to the obligations towards policyholders. Hence, reserves is the most appropriate term for this context.