Loss Reserve

A loss reserve is an amount of money set aside by an insurance company to cover potential future claims. The size of the reserve is based on the company's historical claims experience and its expectations for future claims.

Loss reserves are an important part of an insurance company's financial statements. They represent a liability to the company, and they can have a significant impact on the company's profitability.

There are two main types of loss reserves: incurred but not reported (IBNR) reserves and unearned premium reserves.

• IBNR reserves are reserves for claims that have been incurred but have not yet been reported to the insurance company. These reserves are based on the company's historical claims experience and its expectations for future claims.
• Unearned premium reserves are reserves for premiums that have been collected but have not yet been earned. These reserves are based on the company's expected claims experience and the time it takes for claims to be reported and settled.

Loss reserves are an important part of the insurance industry. They help to ensure that insurance companies are able to pay for claims that are made against them.