Incurred and compensate for the losses, the reserve to cover losses
These concepts are usually applied to losses occurring because of the risks of danger. At any time, paid losses - this is offset by losses from the incident. Provisions for losses are defined as the amount of funds to pay for losses in the future, which, however, have already occurred.
Reserves to cover losses include the reserve for incurred but not settled (although installed) losses and the reserve for incurred but not reported claims. Reserve for incurred but not settled losses estimated at well-known damages that must be paid (sometimes called the alleged losses). Reserve for incurred but not reported claims is estimated that must be paid for incurred but not yet detected (or not reported) losses faced by the organization.
Incurred (incurred losses) losses are determined by the following formula:
Incurred losses = paid losses + Provisions for losses.
Incurred losses are usually combined in the reporting year based on individual losses relating to this year. As the amount of general damages payment of annual paid losses increased. The volume of total reserves for losses is reduced by the same amount, and the amount of loss incurred remains unchanged. When the going gets losses, the total annual amount of incurred loss increases as reserves are established based on estimates of future payments on matured losses. Depending on the size of the losses incurred value losses incurred are often kept open for a few years until they are detected and compensated for all incurred losses for the year.
Even after the end of the reporting period the total losses incurred over the past year may be increased, if the losses were found, under the provisions which have not been formed in advance. Also reported claims reserves are often revised upwards after the year in which they occurred. This is due to the advent of dopopnitelnoy information justifying the increase in future payments on identified losses. The trend of increasing losses occurred over time is known as the development of losses (Loss development) .
