How are unpaid losses treated with respect to S&S in recording?

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Multiple Choice

How are unpaid losses treated with respect to S&S in recording?

Unpaid losses are the claims that have occurred but aren’t yet paid, and salvage and subrogation (S&S) recoveries are potential future inflows that can offset those payments. You can reflect S&S in the reserve in two valid ways. If you net, you reduce the unpaid losses by the expected S&S, giving a net reserve. If you present gross, you keep the full reserve and show the anticipated S&S separately (or as an offset against expected recoveries). Since S&S are future, not guaranteed recoveries, either presentation is acceptable depending on how the financials are shown and disclosed. Thus unpaid losses can be net or gross of anticipated S&S.

Unpaid losses are the claims that have occurred but aren’t yet paid, and salvage and subrogation (S&S) recoveries are potential future inflows that can offset those payments. You can reflect S&S in the reserve in two valid ways. If you net, you reduce the unpaid losses by the expected S&S, giving a net reserve. If you present gross, you keep the full reserve and show the anticipated S&S separately (or as an offset against expected recoveries). Since S&S are future, not guaranteed recoveries, either presentation is acceptable depending on how the financials are shown and disclosed. Thus unpaid losses can be net or gross of anticipated S&S.

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