Reported Losses in Insurance
Definition: Reported losses refer to the amount of money that an insurance company expects to pay for claims related to insured events that have already occurred and have been reported to the insurance company but have not yet been settled or paid. This figure is important as it contributes to the estimation of an insurance company’s liabilities.
Key Points About Reported Losses:
Coverage: Reported losses include any claims made under the terms of insurance policies for events that have already taken place. This could involve various types of insurance such as property, liability, or health insurance.
Implications for Reserves: Insurers need to set aside a sufficient amount of money in reserves to cover these anticipated payments. This calculation affects the financial stability and regulatory compliance of the insurance company.
Process: Upon occurrence and reporting of an insured event, insurers mark these as ‘reported but not paid’ claims (RBNP). Actuarial estimates may be applied to value these claims owing to potential complexity and unsure exact costs involved initially Actuarial Standards Board.
Significance: These figures are critical not only for internal planning but also play a role in regulatory reporting requirements which ensure that the insurance firm operates within the legal financial standards prescribed by authorities such as the Insurance Regulatory and Development Authority (IRDA).
Differences from Incurred But Not Reported (IBNR): While related, IBNRS losses represent claims due to events that have occurred but have not yet been officially reported, thereby adding another level of complexity to insurance balance sheet management.
