Incurred but not reported (IBNR)

IBNR is a reserve for claims that have already happened but are not yet on the books. An insurer's loss reserves include case reserves, set claim by claim, and IBNR, an actuarial estimate. Pure IBNR covers events that have occurred but have not been reported. In practice, the term also includes expected growth on claims already reported, sometimes called IBNER, incurred but not enough reported.

Actuaries build the estimate from the insurer's own history, using loss development triangles that show how claims for each past year grew over time. The longer the tail, the larger the IBNR. General liability, workers' compensation, professional liability and construction defect claims can surface years after the policy ends, so these lines carry heavy IBNR.

Why it matters to buyers: a carrier that underestimates IBNR looks profitable until reserves are strengthened, which can mean charges against earnings, rate increases and a shrinking appetite. Analysts read reserve development in annual statements for that reason. Self-funded employers face the same idea with health claims: the plan owes for care already delivered but not yet billed, so a funding plan or a change of stop-loss carrier must account for a run-out. The guides on loss reserves and reserve development: why they matter to buyers and how to read an insurance company's earnings report show where these numbers appear.