Calendar Year Accounting Incurred Losses

What is ‘Calendar Year Accounting Incurred Losses ‘

Calendar year accounting incurred losses is a term used in the insurance industry to describe the losses incurred by an insurance company by the payment of claims, the re-evaluation of claims already in the company’s books and any negative or positive changes in loss reserves in a particular calendar year.

Explaining ‘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.

Further Reading

  • Capital allocation and timely accounting recognition of economic losses – [PDF]
  • How did financial reporting contribute to the financial crisis? – [PDF]
  • Evidence on the time series properties of insurance premiums and causes of the underwriting cycle: new support for the capital market imperfection hypothesis – [PDF]
  • Write-offs as accounting procedures to manage perceptions – [PDF]
  • Accounting Conservatism in the Property-Liability Insurance Industry – [PDF]
  • Presidential Address: Rate Suppression – [PDF]
  • Audit committee characteristics and loss reserve error – [PDF]
  • Political cost incentives for managing the property‐liability insurer loss reserve – [PDF]
  • It's about time: An examination of loss reserve development time horizons – [PDF]