Most SIR policies require the TPA to report quarterly to the insurer. They also require the TPA to “reserve” the claim. A Reserve is simply the amount of anticipated exposure for a claim, which includes two components. The expense reserve is the amount budgeted for expenses of a claim; the indemnity reserve is the amount budgeted for liability exposure (a judgment or settlement), after taking into consideration the strength of the defense.
Risk Retention Services reviews all reserves on a regular basis, and makes adjustments as necessary. We do not over-reserve claims by using a formulaic approach. We analyze the liability on a realistic basis, and reserve accordingly.
Many insurers or TPA companies set reserves artificially high. Any settlement within that reserve is a “win.” But if the reserve is too high it is likely that any settlement will be too. Both are used by insurers in determining your renewal premium. The amount expended and reserved is often referred to as the “incurred amount.”
You deserve to have someone who sets reserves based upon proper investigation, proper analysis of liability, and proper evaluation of damages. As cases develop, changes do occur. It is not unusual for reserves to be changed to reflect those changes (up or down). Risk Retention Services reviews its reserves on a quarterly basis and makes adjustments accordingly.
