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📋 '''Claims incurred''' represents the total cost of [[Definition:Insurance claim | claims]] attributable to a given period, combining amounts already paid to claimants with the estimated outstanding liability for claims that have been reported but not yet settled, as well as an allowance for claims that have occurred but have not yet been reported ([[Definition:Incurred but not reported (IBNR) | IBNR]]). It is one of the most important figures in an insurer's [[Definition:Income statement | income statement]], forming the numerator of the [[Definition:Loss ratio | loss ratio]] and serving as a primary indicator of [[Definition:Underwriting | underwriting]] performance. Unlike simple cash-basis claims payments, claims incurred captures the economic reality of an insurer's obligations as they arise, aligning costs with the [[Definition:Earned premium | earned premium]] of the same period.

⚙️ The calculation begins with claims paid during the period and then layers on the net change in [[Definition:Claims provision | claims provisions]] — the increase or decrease in [[Definition:Outstanding claims reserve | outstanding claims reserves]] and [[Definition:IBNR reserve | IBNR estimates]] from the start to the end of the reporting window. A positive reserve development (strengthening) adds to claims incurred, while favorable [[Definition:Reserve release | reserve releases]] reduce it. Under [[Definition:IFRS 17 | IFRS 17]], claims incurred is embedded within the broader concept of [[Definition:Insurance service expense | insurance service expense]], which also encompasses changes in the [[Definition:Liability for incurred claims (LIC) | liability for incurred claims]]. [[Definition:US GAAP | US GAAP]] and many statutory frameworks present claims incurred more directly on the face of the [[Definition:Underwriting account | underwriting account]]. Across all regimes, [[Definition:Actuarial analysis | actuarial judgment]] is essential because the IBNR component — particularly for [[Definition:Long-tail business | long-tail]] lines like [[Definition:Liability insurance | liability]] and [[Definition:Workers' compensation insurance | workers' compensation]] — can dwarf the paid claims figure, especially early in a policy year.

💡 The credibility of an insurer's reported claims incurred hinges on the quality of its [[Definition:Reserving | reserving]] process. Analysts, [[Definition:Rating agency | rating agencies]], and regulators in every major market — from Japan's [[Definition:Financial Services Agency (FSA) | FSA]] to the [[Definition:Prudential Regulation Authority (PRA) | PRA]] in the United Kingdom — scrutinize trends in claims incurred relative to prior-year estimates to detect whether reserves are adequate, redundant, or deficient. Persistent favorable development suggests a company has been conservatively reserved, which bolsters confidence; chronic adverse development signals potential underpricing or [[Definition:Reserve deficiency | reserve weakness]]. For [[Definition:Reinsurance | reinsurers]], the claims incurred figure reported by [[Definition:Ceding company | cedants]] directly drives [[Definition:Ceded claim | ceded claims recoveries]] and influences treaty renewal terms. In short, claims incurred is the single metric most tightly linked to the fundamental promise insurers make — paying claims — and its accurate measurement underpins the financial integrity of the entire industry.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Loss ratio]]
* [[Definition:Incurred but not reported (IBNR)]]
* [[Definition:Claims provision]]
* [[Definition:Reserve release]]
* [[Definition:Insurance service expense]]
* [[Definition:Earned premium]]
{{Div col end}}

Definition:Claims incurred - Revision history

PlumBot: Bot: Creating new article from JSON