Claims Reserve

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DEFINITION of 'Claims Reserve'

The claims reserve is money that is earmarked for the eventual claim payment. The claims reserve funds are set aside for the future payment of incurred claims that have not been settled and thus represent a balance sheet liability.

BREAKING DOWN 'Claims Reserve'

Claims reserves are future obligations of an insurance company. They are classified as liabilities on the insurance company's accounting statements since they must be settled at a future date. The monetary amount of the claims reserve can be calculated subjectively (using the claims handler's judgment) or statistically (by evaluating past losses to project future losses).

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