A reserve is the insurer's internal estimate of what a claim will ultimately cost. Case reserves are set on individual claims, while bulk and incurred-but-not-reported reserves cover anticipated development across a book of business.
Reserves are revised as the claim develops, and material changes are typically documented with a rationale in the claim file.
Alternative Names:
Loss Reserves, Claim Reserves
Why it Matters?
Reserve accuracy drives pricing, reinsurance reporting, and settlement authority. In litigation, reserve history is a frequent discovery target in bad faith cases because a reserve substantially above the settlement authority granted, or a reserve increase timed near a rejected demand, is powerful evidence of what the carrier actually believed the case was worth.
Frequently Confused with
Related terms
Frequently asked questions
Are reserves an admission of the claim's value?
When are reserves discoverable?
