What are defined as losses paid plus the change (positive or negative) in outstanding loss reserves within a given period of time?

Question

Options

• AIncurred losses
• Breassumed losses
• Cceded losses
• Dreinsured losses

• A
  74% (17)
• B
  4% (1)
• C
  4% (1)
• D
  17% (4)

Explanation

Incurred losses (A) is correct because this is the standard actuarial definition: incurred losses = losses paid during the period + the net change in outstanding (unpaid) loss reserves. This formula captures the true economic cost of losses in a period regardless of when cash actually changes hands.

Reassumed losses (B) refers to losses a reinsurer takes back from a cedent - a reinsurance transaction concept, not a loss measurement formula. Ceded losses (C) are losses transferred to a reinsurer by the primary insurer - again a reinsurance flow concept, not a definition of how losses are measured. Reinsured losses (D) is a general term for losses covered under a reinsurance arrangement, not a formula for calculating loss totals.

Memory tip: Think "incurred = I'm on the hook for it." Paid losses are what left your wallet; the reserve change is what you've promised but haven't paid yet. Add them together and you have everything you've incurred - your full obligation for the period.

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