Case Reserves

Study guides: Exam 5, Exam GI-101

Case reserves (also called case outstanding) are claim-specific estimates of the expected future payments on individual reported claims, established by claims adjusters based on the known facts of each loss.

\text{Reported (Incurred) Losses}

= \text{Paid Losses} + \text{Case Reserves}

\text{IBNR} = \text{Ultimate Losses} - \text{Reported Losses}

• Case reserves reflect the adjuster's current best estimate and are updated as new information emerges — medical reports, legal proceedings, settlement negotiations
• Changes in case reserving adequacy over time (systematic strengthening or weakening) distort development triangle patterns; the Berquist-Sherman adjustment restates historical triangles to current reserve levels
• Total unpaid claim liability = Case Reserves + IBNR; case reserves cover known claims while IBNR covers unreported claims and development on known claims

Case Reserves in the Incurred Triangle At 12-month evaluation, AY 2023 has $400{,}000 paid and $600{,}000 in case reserves. The 12-to-ultimate CDF is 1.50.

Answer Reported (incurred) at 12 months = 400{,}000 + 600{,}000 = \$1{,}000{,}000

Chain ladder ultimate = 1{,}000{,}000 \times 1.50 = \$1{,}500{,}000

IBNR = 1{,}500{,}000 - 1{,}000{,}000 = \$500{,}000