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Investopedia explains 'Calendar Year Accounting Incurred Losses '
Loss reserves are the amount of money budgeted or set aside by the management of an insurance company, at the beginning of the year, for payment of old and new claims by the company.
The insurance industry views the amounts paid out to claimants as losses because the money expended for claims is money that is going out of the company as opposed to remaining with it. So, at the end of every calendar year, insurance companies look at their reserves and calculate losses by subtracting the amounts paid for old and new claims, any changes in reserve levels made by management and any changes in claims already in the books that haven't been paid out yet.
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