Loss run
A document issued by the outgoing insurer detailing, over several years, an insured's claims, paid and reserved, which forms the basis for any new insurer's experience rating.
A loss run summarizes, for an insured over a period of several years, usually five, all reported claims: date of occurrence, nature, amounts paid, outstanding reserves, open or closed status, any recoveries. It is issued by the current insurer at the request of the insured or its broker, and it is the central document in any marketing of the risk, since the new insurer has no other way to know the risk's experience. Reading it requires care. Reserves on open claims may be underestimated; recent claims have not reached their final cost; a change in deductible or scope makes years incomparable without adjustment; and claims below the deductible, which do not appear, may conceal high frequency. The underwriter therefore restates the loss run, developing recent claims to ultimate and trending older ones, before using it for pricing. In France, the insured has a right to a claims history statement in certain lines, notably motor, so it can change insurer without losing the record of its behavior.
Textbook case: a five-year loss run shows 2.1 million euros of claims, including 900,000 in the most recent year, still largely open. After development to ultimate using the line's factors, that year's cost is estimated at 1.5 million, and the restated average annual losses rise from 420,000 to 540,000 euros.
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