Case reserves are recorded by an Insurance Company to account for the estimated amount that will be paid to an insured for a known claim. Case reserves also include amounts estimated to be incurred by the Insurance Company to investigate, adjudicate and settle known claims.
Case reserves are initially established at the best estimate to settle a claim, including related loss adjustment expenses. This initial estimate is revised anytime new information becomes known and the Insurance Company should reflect this change in the financial statements by recording a journal entry. Case reserves remaining after the claim is settled and all related expenses are paid are reduced to zero and the claim is closed.
This OnDemand Learning session will provide examples for recording and adjusting case reserves throughout the life cycle of a claim.