P
Pacted
Member
Hi all,
I am quite new to general insurance, and encountered negative IBNR at work. Upon internet research, I learned that IBNR can be negative due to things like salvage and subrogation (non-reinsurance recoveries).
My colleague mentioned to me that when IBNR is calculated from claims incurred to reported (as opposed to incurred to paid-- both of which are incurred claims, apparently), without taking into account salvage or subrogation, it can never be negative. I am failing to wrap my head around this.
1. I understand the difference between paid and incurred claims. This incurred to reported vs. incurred to paid are both apparently incurred claims, with the difference to do with their dates (columns of the triangle).
2. How can IBNR be negative (I understood it as when the case estimates are too high the IBNR is used as a correction term etc. Is this true?) and how can it NOT be negative?
Any help would be appreciated. Thanks in advance!
I am quite new to general insurance, and encountered negative IBNR at work. Upon internet research, I learned that IBNR can be negative due to things like salvage and subrogation (non-reinsurance recoveries).
My colleague mentioned to me that when IBNR is calculated from claims incurred to reported (as opposed to incurred to paid-- both of which are incurred claims, apparently), without taking into account salvage or subrogation, it can never be negative. I am failing to wrap my head around this.
1. I understand the difference between paid and incurred claims. This incurred to reported vs. incurred to paid are both apparently incurred claims, with the difference to do with their dates (columns of the triangle).
2. How can IBNR be negative (I understood it as when the case estimates are too high the IBNR is used as a correction term etc. Is this true?) and how can it NOT be negative?
Any help would be appreciated. Thanks in advance!