Which of the following components is NOT included in reserves?

• A. Uncollected deductibles
• B. Damage waiver hits
• C. Operational expenses
• D. Uncollected subrogation

Answer: (C)

Reserves are funds set aside to cover future liabilities or potential losses in a business context. This includes anticipated costs that a company may incur, which can arise from various factors, including claims, deductibles, or recoveries.

Operational expenses are ongoing costs for running the business, such as salaries, rent, and utilities, and they are not set aside for dealing with particular liabilities or claims. Therefore, they do not fit into the category of reserves, which are specifically allocated for uncertain future claims and losses.

In contrast, uncollected deductibles, damage waiver hits, and uncollected subrogation are all amounts related to claims or potential recoveries that may need to be addressed in the financial planning of a company. These components directly relate to future liabilities and the company’s ability to manage and recover from potential losses. They are expected to be factored into reserves to ensure that funds are available when necessary.