Loss Reserves

Loss reserves are funds set aside by insurance companies on their balance sheets to cover the estimated cost of future claim payments for losses that have already occurred but have not yet been fully settled or paid — including claims that have been reported but not yet paid (RBNS) and claims that have occurred but not yet been reported (IBNR). Accurate loss reserve estimation is one of the most critical and technically complex functions in insurance financial management, requiring actuarial analysis of historical loss patterns, claim development trends, and forward-looking risk factors. Under-reserving inflates reported profits and may signal financial fragility, while over-reserving depresses earnings. For investors on Ventura Securities evaluating general insurance companies such as New India Assurance, ICICI Lombard, or Star Health, the adequacy of loss reserves — assessed through the combined ratio, reserve development trends, and actuarial certifications — is a primary indicator of underwriting quality, earnings sustainability, and long-term solvency.