How is the reserve amount calculated?

The reserve amount is calculated using a 12-month rolling average of losses, along with a buffer. This method allows for a more accurate and dynamic assessment of potential future losses based on historical data. By averaging losses over the past year, the calculation considers fluctuations in performance and provides a smoother estimate that adjusts for variations, ensuring that the reserve is adequately funded to cover expected claims or losses. The inclusion of a buffer further enhances the stability of the reserve, allowing for unforeseen circumstances that may not have been fully captured by past data. This approach is particularly effective in risk management as it combines empirical data with strategic foresight, helping entities maintain financial stability in the face of potential risks.