Glossary
Claims Reserve
The amount an insurer sets aside as its estimate of what an open claim will ultimately cost.
Reserves are estimates that move as a claim develops. An adjuster sets an initial figure and revises it as facts emerge; the reserve stands in for the eventual payment until the claim closes.
Reserves count against loss ratio while the claim is open, which means they directly affect an agency's contingent commission before a single dollar is paid out. A large reserve later reduced can swing profit sharing in both directions.
See also
- Loss Run — A carrier-issued report of an insured's claims history over a stated period, used in underwriting and renewal marketing.
- Profit Sharing — A carrier bonus paid to an agency when the business it placed performs better than an agreed loss-ratio threshold.
- First Notice of Loss — The initial report of a claim to the carrier, starting the claims process.