How should loss fund movements be reconciled with claims bordereaux?
Reconcile the claims bordereau, payment or settlement records and loss fund ledger for the same contract, currency and cut-off period. Match individual paid transactions where identifiers permit, then bridge opening balance, top-ups, payments, recoveries and adjustments to closing balance. Investigate timing differences separately from missing or duplicate transactions. AI can help match inconsistent references, while finance and claims owners approve unresolved differences.
Key takeaways
- Agree the fund, contract, currency and cut-off before comparing totals.
- Reconcile transactions and the opening-to-closing balance bridge.
- Classify timing differences rather than forcing a false match.
- Keep evidence and owners for unresolved variances.
Where a delegated claims administrator still pays claims from a loss fund, it reports the underlying claims through a bordereau. The fund ledger and claims report have different purposes and may update on different dates. A total that appears to balance can conceal duplicated payments or missing entries. Lloyd’s Faster Claims Payment arrangements can remove the need for a DCA-held loss fund, so teams should confirm which payment model applies before using this control.
Define the population and balance bridge
Identify the relevant contract, fund account, reporting period, currency and cash cut-off. Obtain the approved opening balance, top-ups, claim payments, recoveries, fees or adjustments where permitted by the agreement, and the closing balance. Keep gross and net amounts clearly labelled. The exact permissible movements depend on the fund terms; obtain those terms before treating an item as valid.
Reconcile with established controls
Finance and claims teams can compare ledger movements with bank or payment evidence and the paid transaction rows in the claims bordereau. Match by payment reference, claim reference, amount, currency and date where reliable. Produce a bridge from opening to closing balance and a separate list of unmatched transactions. Distinguish payments authorised but not yet settled, late bordereau reporting, reversals and genuine discrepancies. Never erase a difference just to make a period balance.
Use AI for difficult matching
AI can suggest links where a DCA uses one claim reference and the managing agent another, or where remittance descriptions are inconsistent. It may classify narrative adjustments for review and group similar unmatched items. Such matching is probabilistic. Require traceable evidence for each proposed match, particularly when amounts recur, several claims share an account or one payment covers multiple claims. A deterministic match remains preferable when stable references exist.
Escalate and sign off differences
Assign each variance to a claims or finance owner, set an investigation date and record the explanation and supporting evidence. Check whether the variance affects fund sufficiency, customer payments or financial reporting and escalate material issues through the agreed oversight route. Reperform the balance bridge after corrections and keep a record of the sign-off. Review recurring causes with the DCA so the source reporting can improve.
Example
In a hypothetical DCA arrangement, the monthly claims bordereau shows a payment that the fund ledger records in the next period. The reconciliation team matches the claim and payment references, records a cut-off timing difference and checks that the item clears in the following cycle. A second unmatched payment has no claim reference; the claims owner investigates it before signing off the fund balance.
FAQs
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Can a matching total prove the fund is reconciled?
No. Equal totals can conceal offsetting errors, so check significant transactions and the balance bridge.
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How should a payment spanning several claims be handled?
Link the payment to an allocation schedule and check that component claims add to the settlement amount.
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Should AI clear unexplained differences?
No. It can suggest evidence and classifications, but accountable claims and finance owners decide and record the resolution.
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