While setting a reserve is required by the insurer, it brings little benefit to the loss adjuster.

It is impossible to set an accurate reserve immediately after a major loss, particularly one involving business interruption losses. As such, it is pointless to even try.

If an adjustment to the reserve is necessary, the adjustment and the reason for the adjustment should be reported to the insurer as soon as practicable.

The difference, if any, between the opening reserve and final settlement figures serves to show how good the loss adjuster is in settling claims. The more the adjuster can save off the reserve, the better the adjuster.

From an Insured’s perspective, it is preferable that the loss adjuster and insurer set an adequate reserve.

Policy deductibles and possible recoveries from negligent third parties should be factored into the reserve by the loss adjuster.

The fees of experts and legal fees (if litigation is anticipated) should be factored into the reserve by the loss adjuster and/or claims preparer.

One of the keys to setting an accurate reserve is for the loss adjuster to understand the client’s business.