IBNR

IBNR stands for Incurred But Not Reported. In insurance accounting and reserving, IBNR is the portion of a claimant reserve intended to cover losses that have already occurred but have not yet been reported to the insurer, or for which the reported claims have not yet fully developed. IBNR is a fundamental element of unpaid claims reserves and is estimated to reflect the insurer’s expected ultimate cost of claims arising in a given period.

IBNR is distinct from IBNER (Incurred But Not Enough Reported), which reserves for the further development of claims that have already been reported. The two components together help determine the total reserve for unpaid claims.

Estimation methods include chain-ladder (development factor) techniques, Bornhuetter-Ferguson methods, and stochastic approaches such as Mack or bootstrap methods. Data are typically organized by development year and accident or underwriting year, with exposures and loss development patterns used to project ultimate losses. In some lines with limited data, external benchmarks or an a priori expected loss ratio are incorporated.

IBNR is sensitive to assumptions about reporting lags, development patterns, changes in claims handling, inflation, and catastrophe experience. Because IBNR relies on historical patterns and assumptions about future development, it carries model risk and may require regular reviews and updates. In financial reporting and regulatory contexts, IBNR reserves influence surplus, solvency, and the timing of expense recognition.