The bulk reserves are used when statistical analysis indicates that the ultimate development of the original reserves will be deficient are called:

Question

Options

• AClaims-made reserves
• BSupplemental reserves
• CReopened claim reserves
• DClaims-in-transit

• A
  4% (1)
• B
  80% (20)
• C
  12% (3)
• D
  4% (1)

Explanation

Supplemental reserves are bulk reserves established when statistical analysis reveals that original case reserves are systematically underestimating ultimate losses - they act as a buffer added on top of individual case reserves to correct for predicted deficiency across a portfolio.

Why the distractors are wrong:

• A. Claims-made reserves relate to coverage trigger timing (when a claim is reported), not reserve adequacy adjustments.
• C. Reopened claim reserves are set aside specifically for claims that were previously closed and then reopened - a distinct, narrower category.
• D. Claims-in-transit (also called IBNR-transit or pipeline reserves) cover claims already reported to agents or insureds but not yet entered into the insurer's system - again a separate concept.

Memory tip: Think of "supplemental" as supplementing what's already there - when your reserves need a statistical top-up because the numbers say they'll fall short, you supplement them. The word itself describes the function.

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