Incurred Losses refer to the total amount of losses that an insurer has experienced during a particular period, usually a policy year. This includes both the claims that have been paid during the period and the loss reserves that have been set aside to cover claims that have been reported but not yet paid, as well as claims that are expected to be reported in the future.
EXAMPLE:
An insurance company sets aside $10,000 in reserves for a policy that covers a building for the policy year 2023. during the policy year, they pay out $5000 in claims and set aside an additional $2000 for expected future claims. The incurred losses for the policy year 2023 would be $7000.