IBNR reserve

Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22

Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22

Category: Reserving · Reviewed by Amy Price, Account Executive · Last reviewed

The IBNR reserve is the amount held for claims that have been incurred (the insured event has occurred) but not yet reported to the insurer at the reserving date. In UK and Solvency II practice the term is often used in a “broad” sense to include IBNER (incurred but not enough reported).

Calculation methods

For each line of business, the IBNR reserve is typically estimated using one or more of:

• Chain ladder — projecting losses to ultimate using historical development patterns.
• Bornhuetter-Ferguson — blending expected losses with chain ladder for immature years.
• Cape Cod — data-driven expected loss ratio.
• Frequency-severity — separate models of claim count and average claim size.
• Expected loss ratio — applied to earned premium for new lines or sparse data.
• GLM at individual claim level — for sophisticated personal-lines portfolios.

Materiality

For short-tail property risks, IBNR may be 5–10% of total ultimate at the end of the accident year. For long-tail liability, IBNR can be 50%+ of ultimate at 12 months. For very long-tail latent classes (asbestos, abuse), IBNR may continue to develop for decades.

References

• IFoA. General insurance reserving practical guides.
• Friedland, J. (CAS, 2010).
• Solvency II Directive 2009/138/EC, Article 77.

Cross-references

• Outstanding claims reserve
• Case reserve
• IBNR
• Chain ladder method

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