That part of the premium or reinsurance premium applicable to the unexpired portion of the policy. The unearned premium reserve is the accounting provision at a specific time that reflects the total amount of unearned premiums. The effect is to write down current profits by the reserve and carry it forward as income in the next financial year.

an amount representing a pro rata spread of premiums (sometimes less acquisition costs) carried forward from one accounting period to the next in recognition of the unexpired period of contracts remaining at the balance sheet date.

A contract defective only in the sense that it cannot be enforced by direct legal action. The contract is otherwise valid and subsisting, so a transferee of property gains a good title and any deposit paid may be retained. A contract of fidelity guarantee not in writing would be unenforceable (the Statute of Frauds).
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This is one, which lacks some evidential features. The contract is a valid one otherwise, but could not be enforced in a court of law.

Provision to safeguard the insurer against any deficiency in the unearned premium reserve. The risk reserve also allows for possible claims under contingency policies that run in perpetuity and do not lend themselves to annual apportionment.

(1) a provision for claims expected to arise in respect of the unexpired period of contracts in existence at the balance sheet date; (2) the excess of the amount of unexpired risks over the unearned premiums.