Calendar Year Accounting Incurred Losses

Unfortunately for insurance companies, there comes a time when they have to pay out an insurance claim to a policyholder. Calendar year accounting incurred losses refers to all the claims paid during a particular calendar year, January 1 through December 31.

The figure might include claims filed in previous years but due to a dispute or other delays they are not paid until the next calendar year. Another source of accounting incurred losses is a revaluation of claims that have already been processed and recorded in their books. Perhaps they were only going to pay Mary Accidentprone $5,000 after she drove through her closed garage door, but upon further investigation the company decided they had to pay out another $1,000.

Another probable source of incurred losses is when an insurance company has to increase the amount of money it has in reserves in order to cover claims. Required reserve levels are set by state governments at about 8%-12% of a company's total revenue. Their revenue changes throughout the year, so their reserves might have to increase and be recorded as a calendar year accounting incurred loss.