Reserves and incurred claims

On 31 December an insurer must say what it still owes for everything that has happened so far. That amount, the reserves (or technical provisions), is usually the largest figure on its balance sheet, and it is an estimate.

Case reserves

For each open claim, a claims handler estimates what is still to be paid: the case reserve (claims.reserve). It is revised as the claim develops, and falls to zero when the claim closes. At the story's today Harbour Mutual has 93 open claims with case reserves of €236,677.16.

Incurred but not reported

Some losses have already happened but nobody has told the insurer yet: a burst pipe in a holiday home, a hospital bill still in the post. They are IBNR, incurred but not reported, and they must be reserved for too, although not a single row describes them.

Because reports keep arriving weeks after the loss, the claims for December 2025 are certainly incomplete on 31 December. Harbour Mutual's data leaves out every loss reported after that date, just as a real insurer's would: those are its IBNR.

Adding it up

Case reserves can also turn out too low or too high as claims develop; that part of the estimate is sometimes called IBNER (incurred but not enough reported). Actuaries estimate IBNR and IBNER together from how claims have developed in the past, using development triangles (see Claims development).

Under Solvency II these provisions are a best estimate of future payments plus a risk margin; getting them wrong changes both profit and the capital an insurer must hold.