Outstanding claims reserves

The provision for outstanding claims ( particularly in property and casualty insurance, commonly referred to as loss reserve ) is a technical provision. It is formed by insurance companies for up to the balance sheet date, that have already occurred and until then, either known or unknown, but not yet or not fully regulated damages ( insurance claims ).

In principle, the loss reserves are to form the basis and amount claimed for each insured event, it is the principle of individual valuation. This means that for each case an independent, conservative accruals and is to be made and thus a compensation effect between the individual insurance claims shall be excluded.

The value approach is beneficial to the alleged settlement amount. Discounting is allowed only in annuity reserves.

Receivables from recourse, salvages and sharing agreements are to be deducted from the amount of the provision. This is done because here recourse to third parties ( subrogation ) or claims to an insured object exist ( salvages ) or more insurers are liable ( sharing agreements ).

There shall be set forth provisions for unknown late effects ( IBNR = incurred but not reported ). These are losses that have already arisen, have been the insurer but not yet reported. With the IBNR losses correspond the IBNER damage. This abbreviation stands for incurred but not enough reserved and refers to damages that have already occurred, but for which insufficient loss reserves were formed. The experience so far with regard to the number and amount of late effects are taken into account.

Similarly, a part of the provision for settlement costs to make.

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