Outstanding claims reserve

Category: Reserving · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed

Outstanding claims reserve

The Outstanding Claims Reserve (OCR) is the liability held for claims that have been reported to the insurer but not yet fully settled at the reporting date. It comprises the sum of individual case reserves on all open claims, often supplemented by claims-handler estimates of future development.

Distinguished from related reserves

• OCR (Case reserves) — claims reported and known.
• IBNR — claims incurred but not reported.
• IBNER — inadequacy of case reserves on reported claims.
• UPR / URR — unearned premium reserve and unexpired risk reserve.

The technical provisions on a Solvency II basis aggregate all of these, plus a risk margin and discount for time value of money.

How case reserves are set

• Formulaic — for high-volume, homogeneous claims (motor windscreen, simple property), a banded scale based on claim type.
• Claims-handler estimate — for individual material claims, the handler reserves based on facts known.
• Specialist input — for complex liability claims, defence counsel and quantum experts.
• Peer review — large claims reviewed by senior claims management.

References

• IFoA. Reserving practical guides.
• Friedland, J. (CAS, 2010). Estimating Unpaid Claims Using Basic Techniques.

Cross-references

• Case reserve
• IBNR reserve
• IBNR

Maintained by Matt Bartlett, Director, Apex Insurance Brokers Limited. FCA FRN 724952. Companies House 07014570.