West Virginia Workers' Compensation (WC) Adjuster Practice Test 2025 – All-in-One Resource for Exam Success!

The nature of incurred-but-not-reported (IBNR) reserves is accurately described by the statement that they are general reserves to account for unknown claims. IBNR reserves are established by insurance companies to cover the financial exposure related to claims that have occurred but have not yet been reported to the insurer.

These reserves are vital because there is often a delay between the occurrence of a claim and its formal notification. By setting aside these general reserves, insurers are better equipped to manage and anticipate future claims that may surface, thus ensuring they have adequate funds to cover potential liabilities. This practice reflects a proactive approach to risk management in the insurance industry, aligning with the principles of conservatism in financial reporting, where entities prepare for possible future obligations even if they are currently unknown.

The other options do not accurately capture the essence of IBNR reserves. For instance, specific reserves are linked to claims that are already known, while reserves related to settled claims would not fall under the IBNR category because these are claims that have already been resolved and do not require additional reserves. Lastly, reserves are not required for every claim filed; IBNR specifically pertains to claims that have occurred but have yet to be reported.