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In the context of insurance, a reserve refers specifically to funds that are set aside to cover the potential future claims that the insurer anticipates may arise. Insurers estimate these reserves based on various factors, including historical loss data, actuarial calculations, and the types of insurance policies they have issued. This ensures that the company has sufficient capital available to pay out claims even if they occur at a higher than expected frequency or severity.

Reserves are a critical component of an insurance company's financial health, as they provide a cushion to meet obligations to policyholders. Properly managing reserves also assures regulators and consumers that the insurer can fulfill its promises.

Funds earmarked for future claims do not encompass investments in corporate strategies, which are more related to capital management and business growth rather than the immediate need to cover policyholder claims. Additionally, payments made to policyholders and losses incurred in previous claims are operational expenses that do not represent funds set aside for future liabilities. Thus, the definition of reserves as funds earmarked for potential future claims accurately captures their purpose within the insurance framework.