Reply To: IBNR
Vanshika Gupta
Incurred But Not Reported (IBNR) is a type of reserve account used in the insurance industry as the provision for claims and/or events that have transpired, but have not yet been reported to an insurance company.
In IBNR situations, an actuary will estimate potential damages, and the insurance company may decide to set up reserves to allocate funds for the expected losses. To an actuary, these types of events and losses are said to have been incurred, but not reported.
IBNR is frequently used by insurance companies, particularly along the East and Gulf Coasts of the United States, where hurricanes are common. After a storm hits, actuaries estimate the potential damage to infrastructure and the claims that may be anticipated. Based on this analysis, money is then set aside (in a reserve) to pay for claims. In this example, the actual losses have been incurred, but have not officially been reported.