Claim reserves in general insurance

Extract

1.1. This paper is concerned with claim reserves in general insurance. General, or non-Life, insurance may be taken to include such classes of business as Motor, Liability, Property, etc., and the claim reserves with which the paper is concerned are usually described as ‘outstanding claims reserves’ or ‘reserves for claims incurred but not reported’ (I.B.N.R.). Each of these reserves falls under the heading of ‘technical reserves’, and may be referred to as ‘provisions’ by the accountancy profession. Such reserves are intended in some sense to represent the liability of the insurer arising from events which have occurred within the scope of, and during the period of currency of, the insurance. It is implicit in the definition of such reserves that there is defined a specific date, which will be referred to in this paper as the accounting date, to which the reserves relate. The need for outstanding claim reserves arises from the separation in time of the reporting of a claim to an insurer from the subsequent settlement of that claim, whether this settlement involves the payment of a positive sum by the insurer, or whether, in the event, no payment is made.