In general, what does the holdback agreement help prevent?

The holdback agreement is designed to create a buffer that helps mitigate significant changes in adjustment calculations over time. This is particularly important in industries where claims can vary greatly due to external factors, potentially leading to large financial discrepancies if not managed properly. By implementing a holdback, businesses can set aside a portion of funds to cover unforeseen losses or claims, smoothing out the financial impact and stabilizing the adjustment process.

This mechanism ultimately aids in providing a more predictable and controlled approach to financial adjustments, allowing stakeholders to avoid large swings that could arise from unexpected claims or market conditions. Therefore, the focus on large fluctuations in adjustment calculations underscores the primary benefit of a holdback agreement.