While reviewing a group of professional liability claim files, I found it necessary to discuss the nature of the exposure and the relativity of the pending case reserves with a seasoned adjuster. Our conversation included an explanation of the intent of case reserves and the downstream importance to underwriters and actuaries. “No one ever explained it to me like that,” was the response from this 22-year adjusting veteran.

The response caught me off guard, especially coming from someone with so many years in the business. I immediately thought of how many organizations I have inherited or reviewed wherein case reserves remained at inappropriate levels until shortly before payment of the loss. In fact, I remember one specific organization’s reserving philosophy: No claim will be reserved before its time. The result? Last-minute loss and loss adjustment expense increases that created surprises and problems for the production department as well as re-insurers.

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