Insurance reserves, claims data and loss development triangles

The following Insurance & Reinsurance practice note provides comprehensive and up to date legal information covering:

• Insurance reserves, claims data and loss development triangles
• Loss reserves
• Solvency II—valuation of loss reserves
• Calculating loss reserves
• Loss reserves—commercial considerations for lawyers
• Allocation of loss reserves to years of account
• Loss development—short tail and long tail risks
• IBNR—reserves for unreported losses
• Practical uses of insurance claims data

## Insurance reserves, claims data and loss development triangles

This Practice Note explains insurance industry practice in relation to loss reserves, insurance claims data and loss development triangles in general insurance. It also provides information about the significance of this data for insurers and guidance for lawyers regarding the relevance of claims data in insurance disputes. This Practice Note also explains terminology relating to loss reserves, including incurred claims, outstanding loss reserves (OSLR), incurred but not reported (IBNR) and incurred but not enough reported (IBNER).

Life and health insurance reserving is based on very large samples of mortality and morbidity statistics. Setting reserves for life and health insurance tends to be more of a mathematical process than for most types of general insurance. Calculation of life and health reserves are beyond the scope of this Practice Note, which is focused on general insurance.

References in this Practice Note to ‘insurers’ also apply to ‘reinsurers’ unless the context indicates otherwise.

### Loss reserves

When a policyholder notifies a loss or potential loss under an insurance policy, the insurer will typically make a preliminary assessment of coverage and quantum. On the basis of its preliminary assessment, the insurer will then establish a reserve in respect of the loss. At this point, the loss is recognised as an ‘incurred loss’. The reserve is an estimate of the insurer’s future liability to the policyholder. Reserves