Property claims glossary
What is a claim reserve?
A reserve is the carrier's running estimate of what a claim will ultimately cost, set early and adjusted as the facts develop. Reserves are not payments, but they feed financial reporting, reinsurance and pricing, so they need to move as soon as the file shows the claim is larger or smaller.
Worked example · fictitious claim
A carrier sets a $10,000 opening reserve on a roof claim at FNOL. The inspection finds $14,000 of covered damage and a $1,000 deductible, so the reserve rises to $14,000 − $1,000 = $13,000. After a first payment of $10,000, holding back $3,000 of depreciation, the open reserve is $13,000 − $10,000 = $3,000.
How it affects a settlement
A reserve does not decide what is paid, but it should track what is expected to be paid. A large late change usually means something in the file came to light late.
In practice
The carrier's running estimate of what a claim will ultimately cost, set early and adjusted as facts develop. Inaccurate reserves distort everything downstream (reinsurance, pricing, and financial reporting), and reserves set on unread files are guesses.
Related
Large loss · First notice of loss (FNOL) · AI layer on a core claims system · property claims glossary