Reserving at quarter end: what the analyst actually delivers
Reserving estimates unpaid claims for a specified valuation date. A strong close process links the accounting totals, claim-development analysis, selections and explanatory memo.
A workable sequence
- Reconcile paid claims, case reserves and recoveries to the agreed extract.
- Construct triangles by the appropriate origin and development periods.
- Investigate new large losses, changing case adequacy and unusual calendar-period movements.
- Compare methods and select ultimate claims with documented judgment.
- Calculate unpaid amounts and explain movements to finance and reviewers.
Original Bornhuetter–Ferguson illustration
Earned premium is 10m, the selected expected loss ratio is 60%, and 60% of ultimate claims are expected to have been reported. Reported claims are 3m.
Expected unreported claims = 10m × .60 × .40 = 2.4m. BF ultimate = 3m + 2.4m = 5.4m. If paid claims are 2m, total unpaid claims are 3.4m. If case reserves are 1m, the remaining 2.4m is the model’s IBNR component on this simplified basis.
Do not subtract reported claims when the question asks for total unpaid claims: reported includes both paid and case reserves.
What is routine?
Extracts, reconciliation, exhibit refreshes and close commentary repeat. A claims-system conversion, revised segmentation or new reserving method is project work. “Routine” still involves judgment when experience changes.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.