hardConceptDesignScenarioMidSeniorStaff
A claim is notified and nobody yet knows what it will cost. Why does the system have to put a number on it immediately, and what happens to that number?
5 min readUpdated 2026-08-15
Answer
Short answer
A reserve is money recognised in the accounts on the strength of an estimate, so the insurer's reported result depends on it long before anything is paid. It moves as the file develops, every movement is itself reportable, and the history of movements matters as much as the current figure.
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Likely follow-ups
- Who sets the initial figure when nothing is known yet?
- What is IBNR for, given that case reserves already exist?
- Why separate indemnity from expense on the same claim?
- A closed claim reopens after two years. What happens to the reserve?
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