Definition:Case reserve
📋 Case reserve is the specific dollar amount set aside by an insurer for an individual reported claim, representing the adjuster's best estimate of the ultimate cost to settle that claim. Each time a new loss is reported, the claims adjuster or examiner evaluates the facts — injury severity, coverage applicability, litigation status, and other factors — and posts a reserve to the insurer's books. Unlike IBNR reserves, which address claims that have occurred but have not yet been filed, case reserves deal exclusively with known, open claims.
🔍 Adjusters set initial case reserves based on available information at the time of the first notice of loss, then revise them as the claim develops — medical reports come in, legal strategies shift, or new damages surface. In workers' compensation, for instance, a case reserve might start modestly for a minor injury but balloon if the claimant develops complications requiring surgery and extended rehabilitation. Aggregate case reserves across the entire book feed into the insurer's loss reserve balance on the balance sheet, alongside bulk and IBNR estimates. Actuaries monitor the pattern of case-reserve development — known as the "development triangle" — to calibrate broader reserve adequacy.
⚠️ Accuracy in case reserving has outsized consequences. Under-reserved claims erode surplus when they eventually settle above expectations, potentially triggering rating agency downgrades or regulatory scrutiny. Over-reserving, while conservative, inflates reported loss ratios and suppresses apparent profitability, which can distort pricing decisions and mislead reinsurers relying on ceding company data. For MGAs and third-party administrators handling claims on behalf of carriers, demonstrating disciplined, well-documented case reserving practices is essential to retaining delegated authority and building trust with capacity providers.
Related concepts