What is IBNR (Incurred But Not Reported)?

IBNR, short for incurred but not reported, is the amount an insurer holds for claims that have already happened but are not yet fully reflected in its records. It is estimated for a whole portfolio rather than for any single claim, and is held alongside the case reserves set on claims already reported.

This entry explains the narrow and broad meanings of IBNR, how it differs from IBNER and case reserves, the parts of a total claims reserve and how actuaries estimate IBNR, with a worked example. It then sets out which classes of business carry long reporting delays, how IBNR appears in UK GAAP, Solvency UK and IFRS 17 accounts, and what published reserve movements show.

What IBNR means

A claim can exist before the insurer hears about it. The Faculty and Institute of Actuaries' Claims Reserving Manual (1997) gives the example of a ship damaged in harbour, where the damage becomes evident only when she is dry-docked at some later date.¹ The manual divided the claims that had occurred by a valuation date into those already known and reported to the insurer, held as known or reported claims reserves, and those not yet reported, held as IBNR reserves.¹

Lloyd's describes claims provisions and related recoveries as the most significant accounting estimate in preparing its 2025 Aggregate Accounts, in particular for claims incurred but not reported, and states that the IBNR provision is based on statistical methods.² Those methods generally involve projecting from past experience of how claims develop over time to form a view of the likely ultimate claims for more recent underwriting.² The estimate therefore depends on claims triangulation and on the assumption that the past is a reasonable guide to future development, which Lloyd's names as one of the two most critical assumptions behind its claims provisions.²

Pure IBNR, IBNER and case reserves

IBNR has a narrow and a broad meaning. The Casualty Actuarial Society's reserving text, written by Jacqueline Friedland, separates IBNR into incurred but not yet reported claims, called pure IBNR or the narrow definition, and incurred but not enough reported claims, or IBNER, which it describes as development on known claims.³ It defines the broad definition of IBNR as the sum of four provisions: future development on known claims, reopened claims, claims incurred but not reported and claims in transit, meaning claims reported but not yet recorded.³

The 1997 British manual expanded the same letters differently. It said its narrow definition applied usually to direct insurance, while in the London Market IBNR would normally also include an allowance for future deterioration on claims already reported, which it called IBNER, incurred but not enough reserved.¹ The same three letters can therefore cover different amounts in different reports, depending on whether development on known claims is included.

	Case reserves	IBNER	Pure IBNR
What it covers	The estimated unpaid amount on each claim already reported	Future development on claims already reported	Claims that have occurred but have not yet been reported
Who estimates it	Claims professionals: the claims department, third-party adjusters or independent adjusters	Actuaries	Actuaries
Level of estimate	Individual claim	Portfolio	Portfolio
Other names	Case outstanding, unpaid case, case estimates	Incurred but not enough reported (CAS text); incurred but not enough reserved (actuarial manual, 1997); development on known claims	Incurred but not yet reported (IBNYR, in the CAS text); the narrow definition of IBNR
Part of broad IBNR?	No	Yes	Yes

Friedland states that one of the most important reasons for separating IBNR into its components is to test the adequacy of case outstanding over time.³ The two parts respond differently to claims handling: the text notes that the actual pure IBNR remains the same regardless of changes in the adequacy of case outstanding, since those claims have not yet been reported.³ A change in how generously case reserves are set moves the IBNER, not the pure IBNR.

The parts of a total claims reserve

Ultimate claims for a period are the sum of three amounts: cumulative paid claims, case outstanding and IBNR.³ IBNR is therefore the estimated ultimate less what has been paid and less what is held on known claims, and the total unpaid claim estimate is case outstanding plus IBNR.³ The CAS text splits that unpaid estimate into five components, set out below.³

Component	What it is	Broad IBNR?
Case outstanding	Estimates set on known and reported claims, excluding future development on them3	No
Future development on known claims (IBNER)	Further change in the cost of claims already reported3	Yes
Reopened claims	Claims closed and later reopened3	Yes
Pure IBNR	Claims incurred but not yet reported3	Yes
Claims in transit	Claims incurred and reported but not recorded3	Yes
Claims handling costs	Lloyd's includes related claims handling costs in its provision for claims outstanding2	Shown within the provision
Reinsurers' share and recoveries	Lloyd's shows the reinsurers' share of claims provisions separately, and salvage and subrogation recoveries are separately identified and, where material, reported as an asset2	Deducted or shown separately

The split between case reserves and IBNR varies by class. Using consolidated data for the US insurance industry from Best's Aggregates and Averages, 2008 edition, the CAS text reports that unpaid case, net of reinsurance, represented less than 50% of total unpaid claims and claim expenses, and adds that the proportion varies tremendously by line of business and from insurer to insurer.³

How IBNR is estimated

In the CAS text IBNR is not estimated directly: the actuary projects ultimate claims for each accident or underwriting year and derives IBNR as the difference between projected ultimate claims and reported claims at the valuation date.³ Different techniques give different ultimates from the same data, so the CAS text distinguishes the result of a technique, the unpaid claim estimate, from the carried reserve booked in the accounts.³

How an IBNR estimate is built

1

DATA

Group the claims history

Paid and reported claims are arranged by accident, underwriting or report year and by development period, as a claims triangle.

2

PATTERN

Select development factors

Age-to-age factors show how much claims have grown between one valuation and the next in past years.

3

PROJECTION

Project ultimate claims

The development, expected claims and Bornhuetter-Ferguson techniques each give an ultimate for every year.

4

RESULT

Derive IBNR

Estimated IBNR equals projected ultimate claims less reported claims; the total unpaid estimate adds case outstanding.

5

REVIEW

Compare with experience

Later claims emerge and the estimate is updated, with differences reported as prior year development.

Source: Friedland, Estimating Unpaid Claims Using Basic Techniques, Casualty Actuarial Society, 2010.

The three techniques rest on different assumptions. The development technique, known as the chain ladder method, assumes that claims reported to date will continue to develop in a similar manner in the future.³ The expected claims technique sets ultimate claims from an a priori estimate, built for example from premium and an expected claim ratio, rather than from actual claims activity to date.³ The Bornhuetter-Ferguson technique, set out by R.L. Bornhuetter and R.E. Ferguson in their 1972 paper "The Actuary and IBNR", blends the two: ultimate claims equal actual reported claims plus expected claims multiplied by the percentage still unreported.³

Friedland states that actuaries rely on the Bornhuetter-Ferguson technique almost as often as on the development method, and gives the reason: when the cumulative development factor is large, a small swing in reported claims or one unusually large claim can cause a very large swing in the development projection.³ Lloyd's describes a similar practice for its most recent years, where projections are highly volatile and estimates may be based in part on output from rating and other models of the business accepted.²

A worked example: chain ladder and Bornhuetter-Ferguson

The example below uses invented figures for a small portfolio, in thousands of pounds, to show the arithmetic. It assumes claims are fully reported 48 months after the start of each accident year.

Accident year	12 months	24 months	36 months	48 months
2022	300	470	600	750
2023	350	570	700
2024	400	640
2025	450
Age-to-age factor	1.600 (1,680 ÷ 1,050)	1.250 (1,300 ÷ 1,040)	1.250 (750 ÷ 600)	1.000 (assumed)
Cumulative factor to ultimate	2.500	1.5625	1.250	1.000
Share of ultimate reported	40%	64%	80%	100%

Each age-to-age factor divides the total of a column by the total of the column before it, using only the years that have reached both ages: for 12 to 24 months, 470 plus 570 plus 640 is 1,680, against 300 plus 350 plus 400, or 1,050, a factor of 1.6. Multiplying the factors from each age onwards gives the cumulative factor: 1.6 times 1.25 times 1.25 is 2.5 at 12 months. Accident year 2025 has reported 450, so the chain ladder projects an ultimate of 450 times 2.5, or 1,125, and an IBNR of 675.

The Bornhuetter-Ferguson calculation needs an expected claims figure for each year. Here earned premium of 1,000, 1,200, 1,300 and 1,400 for 2022 to 2025 is multiplied by an expected loss ratio of 75%, giving expected claims of 750, 900, 975 and 1,050. For 2025, 60% of claims are still unreported, so the Bornhuetter-Ferguson IBNR is 1,050 times 60%, or 630. The expected claims method ignores the claims reported so far and takes IBNR as expected claims less reported claims: 1,050 less 450, or 600.

Accident year	Reported to date	Chain ladder IBNR	Expected claims	Expected claims method IBNR	Bornhuetter-Ferguson IBNR
2022	750	0	750	0	0
2023	700	175	900	200	180
2024	640	360	975	335	351
2025	450	675	1,050	600	630
Total	2,540	1,210	3,675	1,135	1,161

Friedland, citing Eric Brosius (1993), describes the Bornhuetter-Ferguson method as a credibility weighting between the development and expected claims methods, in which credibility equals the percentage of claims developed, one divided by the cumulative development factor.³ Where cumulative development factors are 1 or more, as here, its result lies between the other two. For 2024, 64% of the chain ladder ultimate of 1,000 plus 36% of expected claims of 975 gives 640 plus 351, or 991, an IBNR of 351.

Accident year	Paid to date	Case reserves	IBNR	Total claims reserve	Ultimate claims
2022	690	60	0	60	750
2023	520	180	175	355	875
2024	380	260	360	620	1,000
2025	150	300	675	975	1,125
Total	1,740	800	1,210	2,010	3,750

In this example IBNR makes up 1,210 of a total claims reserve of 2,010, and the most recent year carries the largest share because the least of its cost has yet been reported. Expressed against earned premium, the chain ladder ultimates imply a loss ratio of 75% for 2022 and about 80% for 2025, against about 77% on the Bornhuetter-Ferguson ultimate of 1,080 for 2025, so the choice of method feeds directly into the reported loss ratio for the latest year.

Short-tail and long-tail business

How much of a year's cost sits in IBNR depends on how quickly claims are reported and settled. The CAS text describes some lines of property insurance and automobile physical damage as short-tail lines, where insurers generally know the value of ultimate claims within a relatively short period, often within one or two years after the end of the accident period, and US general liability and workers compensation as long-tail lines, where it may take many years, and in some situations decades.³

Line and accident year	Paid claims	Case outstanding	Estimated IBNR
Auto physical damage, 2006	100% ($40.4 billion)	0% ($28.1 million)	0% ($7.8 million)
Auto physical damage, 2007	91% ($39.3 billion)	6% ($2.8 billion)	2% ($0.9 billion)
Medical malpractice (occurrence), 2006	4% ($80.0 million)	23% ($0.5 billion)	74% ($1.6 billion)
Medical malpractice (occurrence), 2007	1% ($10.6 million)	6% ($0.1 billion)	93% ($1.9 billion)

Friedland presents the figures to show the differences between accident years and between short-tail and long-tail lines, not as current market data.³ Accident year 2007 for US medical malpractice written on an occurrence basis was 93% IBNR at 31 December 2007, against 2% for automobile physical damage.³

Class or claim type	Why IBNR is large or uncertain
US medical malpractice occurrence, workers compensation and general liability, including products liability and errors and omissions3	Classified as long-tail in the US because of the lengthy period over which claims are reported and settled
Claims-made covers such as medical malpractice, products liability, errors and omissions and directors' and officers' liability3	Cover depends on the date the claim is reported; report year data measures development on known claims but not pure IBNR
Latent claims: industrial disease, environmental pollution, asbestos1	The 1997 manual described losses that may lie dormant for several years after the originating event, then start to be reported at roughly the same time whatever underwriting year they relate to, so that conventional triangulation methods of projection would not work
London Market and reinsurance business1	The 1997 manual described claims development as generally medium or long-tailed, with IBNR often a significant element of the reserves and data on individual claims limited
UK motor third party bodily injury1	The 1997 manual noted that claims could remain outstanding for 7 to 10 years in some cases, and that judicial inflation tended to be erratic
Opioid, sexual molestation and sexual harassment claims4	The PRA listed latency in claims experience among the uncertainties for firms to allow for in 2019 year-end reserving
Cyber and other newer classes4	The PRA pointed to limited data, or limited experience at a given firm

Beazley reports that 60% of the premiums it wrote in 2025 were short-tail and 40% long-tail, defining long-tail insurance as claims that may emerge and develop after the policy expires.⁵

How IBNR appears in the accounts

In the accounts cited in this entry, IBNR is not shown as a separate balance sheet line. It sits inside a wider claims liability, measured differently under each framework a UK insurer may report to.

Framework	Where IBNR sits	What is included	Discounting and margins
UK GAAP (FRS 102 and FRS 103), for example the Lloyd's Aggregate Accounts2	Provision for claims outstanding	Estimated ultimate cost of claims notified but not settled, the estimated cost of claims incurred but not reported, based on statistical methods, and related claims handling costs	Discounted only by syndicates that elect to, for example for books with a mean term of payment greater than four years
Solvency UK, PRA Rulebook67	Technical provisions: the provision for claims outstanding within the best estimate	Claim events that have already occurred, regardless of whether the claims arising from them have been reported or not	Best estimate discounted with the relevant risk-free interest rate term structure, plus a risk margin using a 4% cost-of-capital rate
IFRS 17895	Liability for incurred claims	The obligation to pay claims for insured events that have already occurred, including events not yet reported (Beazley's description)	Measured generally at present value, with current discount rates, plus a risk adjustment for non-financial risk

Under the PRA's Technical Provisions rules, the value of technical provisions must equal the sum of a best estimate and a risk margin, and the best estimate must correspond to the probability-weighted average of future cash flows, using adequate, applicable and relevant actuarial and statistical methods.⁶ For general insurance, the best estimate must be calculated separately for the premium provision and for the provision for claims outstanding, and rule 21.3 says the provision for claims outstanding must relate to claim events that have already occurred, regardless of whether the claims arising from those events have been reported or not.⁷ The rules are annotated as corresponding to Article 77 of the Solvency II Directive.⁶

IFRS 17 measures insurance obligations as fulfilment cash flows, the present value of future cash flows plus a risk adjustment, together with a contractual service margin for unearned profit.⁹ The IFRS Foundation's key terms describe the liability for incurred claims as the insurer's obligation to pay amounts related to services provided.⁸ Beazley's 2025 accounts describe it as the obligation to pay claims for insured events that have already occurred, including events that have occurred but for which claims have not been reported, and report net liabilities for incurred claims of $7,979.1m on insurance contracts issued, before reinsurance, at 31 December 2025.⁵ Beazley also states that it maintains a preferred reserve confidence level between the 80th and 90th percentile across the best estimate and risk adjustment, and that its level at the end of 2025 was the 84th percentile.⁵

Lloyd's market claims outstanding, 31 December 2025

£83,746m

gross outstanding claims, including IBNR (2024: £85,371m)

£57,660m

net of reinsurers' share (2024: £57,267m)

£1,371m

net prior year surplus in 2025 (2024: £1,006m)

Source: Lloyd's, 2025 Aggregate Accounts.

Some Lloyd's syndicates discount their claims provisions; at the end of 2025, discounting reduced gross claims provisions by £250m, from £83,996m undiscounted to £83,746m.²

When the estimate changes: reserve releases and strengthening

Because IBNR is an estimate, it is revised as claims emerge. Lloyd's states that adjustments to claims provisions established in prior years are reflected in the financial statements for the period in which they are made, and that the ultimate liability will vary as a result of subsequent information and events.² A release means earlier estimates were higher than now appears necessary; strengthening means the reverse. Released or strengthened reserves change the reported result, and so the combined ratio, of the year in which the change is made.

Insurer and measure	2025	2024
Lloyd's: prior year development, Aggregate Accounts basis (APM), releases in brackets2	(3.3)%	(2.5)%
Lloyd's: prior year reserve releases as a benefit to the combined ratio, full-year results basis10	1.7%	2.4%
Lloyd's: net prior year surplus2	£1,371m	£1,006m
Beazley: net past service development, an increase being a strengthening5	$16.1m increase	$144.5m release
Beazley: the same, as a share of insurance revenue less allocation of reinsurance premiums, releases in brackets5	0.3%	(2.9)%
Beazley, Specialty Risks5	$159.6m strengthening	$37.7m release
Beazley, Property Risks5	$149.0m release	$68.4m release

Lloyd's reported that 2025 was the 20th consecutive year of prior year releases for the market, with favourable development on property catastrophe events offset in part by strengthening in Aviation, linked to the Russia and Ukraine conflict, and deterioration in Direct Casualty lines.² Beazley attributed its Specialty Risks strengthening to deteriorations on several prior underwriting years and on US health and medical covers, partially attributed to ongoing social inflation.⁵ The two Lloyd's percentages come from different publications on different bases; the full-year results release gives the 1.7% benefit to the combined ratio.¹⁰ Beazley's sensitivity analysis shows that a reasonably possible uniform 5% increase in the best estimate liability would have reduced its 2025 profit after tax by $347.4m gross of reinsurance and $270.4m net.⁵

What makes IBNR hard to estimate

Changes in claims handling distort the triangle. The CAS text shows that, without adjustment, the reported development method overstates projected ultimate claims, and thus IBNR, in times of increasing case outstanding strength, because higher reported claims are multiplied by higher development factors.³ The PRA's 2019 letter to chief actuaries reported continued evidence of weakening case reserves and, in Casualty Financial and Professional Liability, Medical Malpractice and US General Liability classes, higher paid-to-incurred ratios on recent years indicating a possible weakening in the case reserving basis; it also observed bias in some firms' reserve assessments, including optimism in the selection of initial expected loss ratios.⁴

Claims inflation feeds through slowly in long-tail classes. In its 2019 letter, the PRA found some claims teams' views of annual claims inflation were 5% to 10% higher than allowed for in the loss ratio assumptions used in reserving, pricing and business planning.⁴ Its 2023 follow-up reported that at year-end 2022, firms in its sample of 16 (excluding those unable to quantify their allowance) held a weighted-average net-of-reinsurance claims inflation allowance, in addition to inflation already in the data and measured against undiscounted best estimate liabilities, of around 5.9% for predominantly personal lines firms and 3.4% for other firms, within a range of 0.6% to 9%, and found that the average increases applied may not be sufficient.¹¹

The underwriting cycle and distribution model also matter. The PRA's letter on its 2026 priorities said a softening underwriting cycle may place pressure on pricing, terms and conditions and reserving levels, and that it expects boards to ensure they are pricing and reserving adequately.¹² It added that delegated authority business looks set to grow across the London Market, raising additional risks of inadequate pricing and reserving if not properly managed or overseen.¹² At Lloyd's, coverholders write risks on behalf of syndicates under binding authority agreements, and Lloyd's Coverholder Reporting Standards list the claims data that coverholders, and third-party administrators with claims authority, can report to the syndicates, including the date of loss, the date the claim was first advised, and paid and reserve amounts.¹³ In terms of the definitions above, the gap between those two dates is the reporting delay that pure IBNR covers.

Show References Hide References

1. Faculty and Institute of Actuaries. Claims Reserving Manual, volume 1, Section 2: Introduction to Reserving. September 1997.
2. Lloyd's. 2025 Aggregate Accounts. 2026.
3. Friedland, J. (Casualty Actuarial Society). Estimating Unpaid Claims Using Basic Techniques. Version 3, July 2010.
4. Prudential Regulation Authority. Feedback from recent PRA reserving reviews. Letter to chief actuaries, 5 November 2019.
5. Beazley plc. Annual Report and Accounts 2025. 2026.
6. PRA Rulebook. Technical Provisions. Prudential Regulation Authority. Read 10 November 2026.
7. PRA Rulebook. Technical Provisions: Further Requirements, chapter 21. Prudential Regulation Authority. Read 10 November 2026.
8. IFRS Foundation. IFRS 17 Insurance Contracts: key terms. Read 10 November 2026.
9. IFRS Foundation. IFRS 17 Insurance Contracts: Project Summary. May 2017.
10. Lloyd's. Lloyd's market delivers strong full year performance; very strong balance sheet; increased capital. Press release, 19 March 2026.
11. Prudential Regulation Authority. Follow up to the letter: Insights from PRA thematic review of general insurance reserving and capital modelling. Letter to chief actuaries, 23 June 2023.
12. Prudential Regulation Authority. Insurance Supervision: 2026 priorities. Letter, 15 January 2026.
13. Lloyd's. Coverholder Reporting Standards User Guide, Version 5.2. 20 August 2019.