Page 32 - ic92 actuarial

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cash basis of accounting simply recognizes revenues
when they are received and reports expenses when they
are made.
101. The expenses incurred for policy benefits can be
computed through use of the "loss reserve" liability
account. The formula is :
Incurred Losses = Paid Losses + Ending Claim Liability
- Beginning Claim Liability
102. The term loss development is used to describe the
changes that take place in the value of a claim over
time. Once the claim is settled and no further payments
are expected, the claim is closed.
103. Incurred loss is the measure used to calculate the
insurance company's liability.
Incurred Loss = Paid Loss + Ending Loss Reserve
- Beginning Loss Reserve
104. The incurred effect of reserve closings can be calculated
from the same formula :
Incurred Loss = Paid Loss - Beginning Reserve
105. A total loss reserve consists of 5 elements:

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