Incurred But Not Reported

Incurred But Not Reported (IBNR) refers to incidents giving rise to a claim under a policy which have already occurred but a claim has not been reported to the insurer. These can arise because:

• The policyholder has not yet reported the claim.
• A third party has suffered a loss but has yet to trace the policyholder and their insurer (e.g. hit by a policyholder's vehicle and the driver did not stop).
• The policyholder has suffered a loss but is not yet aware of it, e.g. in long-tail claims such as asbestosis where there is a long gap between the exposure and a medical diagnosis.

The quantum of IBNR is always an estimate based on what the insurer expects to pay in the future on policies already written. Some classes of business will be easier to estimate than others, e.g. motor insurance has a fairly predictable claims pattern with a short time between incident and claim, whereas infrequent but severe losses (e.g. aviation) or those with a long period between incident and claim are harder to estimate.