CLAIMS RESERVING PHILOSOPHY Sample Clauses
The Claims Reserving Philosophy clause outlines the approach and principles an insurer uses to estimate and set aside funds for future claim payments. It typically details the methodologies, assumptions, and review processes applied to ensure that reserves are adequate to cover both reported and unreported claims. By establishing a clear framework for reserving, this clause helps maintain financial stability and transparency, ensuring that sufficient resources are available to meet policyholder obligations and regulatory requirements.
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CLAIMS RESERVING PHILOSOPHY. The Service Provider is required to follow the Claims Reserving Philosophy (“Reserving Philosophy”) when providing the Service. The Service Provider’s adherence to the Reserving Philosophy as set out below is intended to ensure that it establishes a case reserve that is prudent and based upon an exposure based approach immune from background factors such as inflation or change in legislation: Incremental changes in reserves which are not supported by adequate evidence are not acceptable to the Volume Claims Service. In all cases, reserving must comply with the Lloyd’s Claims philosophy and Lloyd’s Claims Reserving Minimum Standards and other applicable accounting and regulatory requirements. The reserve set should not seek to discount on a time value for money basis nor should it anticipate for or take credit of subrogation, salvage or recovery opportunities. The recording of reserves should be completed in a consistent, timely and accurate manner taking into account both indemnity and expenses thereby eliminating future uncertainty and possible negative development and utilising the most current information available. Each review of a claim file should consider the adequacy of the loss and expense reserves. If new information has been introduced, its effect on the reserves must be evaluated and dealt with in line with the Performance Levels. The accurate differentiation between indemnity loss values (policy obligation) and expert fee values (expenses) is essential in providing the Service Provider, SMF and the Client the opportunity to adequately manage the Claim and the external third party experts utilised in resolving the VCS Claim. Indemnity and expenses should be recorded as follows: