[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Case Reserves** ## Definition ==Case Reserves== Case reserves are claim-specific estimates of the ultimate cost of reported claims, established by claims adjusters for individual known losses. ## Components ``` Reported Losses = Paid Losses + Case Reserves Case Reserves represent: - Expected future payments on known claims - Indemnity payments - ALAE (allocated loss adjustment expenses) ``` ## Setting Case Reserves ### Initial Reserve When claim is first reported: - Based on initial information - May be formula-driven - Often conservative ### Reserve Updates As claim develops: - New medical reports - Legal developments - Settlement negotiations - Expert opinions ## Case Reserve Development ### Adequate Reserves ``` If reserves are adequate: - Paid claims match reserves - Little development over time - Stable ultimate estimates ``` ### Inadequate Reserves ``` If reserves are deficient: - Payments exceed reserves - Positive development - Increasing ultimates Signs: - Paid-to-incurred ratios increasing - Development factors > expected ``` ## Impact on Reserving ### Case Outstanding Development Method Projects ultimate based on case reserve development: ``` Ultimate = Paid + (Case × Case Development Factor) ``` ### IBNR Calculation ``` Total Reserves = Case + IBNR IBNR = Ultimate - (Paid + Case) ``` ## Related Concepts - [[IBNR Reserves]] - [[Case Outstanding Development Method]] - [[Reported Losses]] ## References - Friedland, Chapter 6