For the purposes of an insurer's income statement, incurred losses are

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Multiple Choice

For the purposes of an insurer's income statement, incurred losses are

Incurred losses are treated as an expense on the insurer’s income statement. They reflect the cost of claims for the period, including both claims actually paid and changes in loss reserves for claims already reported or incurred but not yet reported. This aligns with the matching principle, pairing the period’s claims costs with the premiums earned to determine underwriting profit or loss. While loss reserves are a liability on the balance sheet, the incurred losses line on the income statement is the expense recognizing the cost of claims for that period.

Incurred losses are treated as an expense on the insurer’s income statement. They reflect the cost of claims for the period, including both claims actually paid and changes in loss reserves for claims already reported or incurred but not yet reported. This aligns with the matching principle, pairing the period’s claims costs with the premiums earned to determine underwriting profit or loss. While loss reserves are a liability on the balance sheet, the incurred losses line on the income statement is the expense recognizing the cost of claims for that period.

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