What Does Incurred But Not Reported Mean?

This term is very often used in the field of general insurance referring to stocks stored for future use or need. The main reason these reserves are kept available is the events that have taken place, without having been communicated to an insurance underwriter. In case such a situation occurs, a commissioner called actuary will be responsible to assess the possible harms or losses.

Insurance companies can choose to establish reserves in advance to distribute supplies to these possible damages which have happened but have not been reported yet. To the registrar who calculates insurance premiums and reserves, these losses or events are treated as something that has been incurred without being reported.

Incurred But Not Reported Explained

Reserves for ‘incurred but not reported events’ are very common to be established in those regions where natural disasters or calamities like tornados are frequent. After such an event occurs, an actuary will anticipate the possible demands by evaluating the potential losses. Insurance companies will put away a certain amount of money as a reserve, always taking into account the analysis made by the actuary. This reserve will be used in order to gratify the claims.