How to Read Loss Runs After Buying a Business

A loss run is the insurer's list of every claim reported on a policy. To read one, check four things: how many claims there were (frequency), how big they were (severity), which are still open, and how much the insurer has set aside for them (reserves). After you buy a business, it is also a map of claims you may now have to manage, and the history underwriters will price at your first renewal. This guide is for new owners: how to get loss runs after a purchase, read each column, judge patterns as underwriters do, and act on inherited open claims.

The short answer

Request five years of loss runs for every line from every carrier, with a recent valuation date. In an asset deal you may need the seller's written authorization.
Total incurred is what has been paid plus the reserve the insurer expects to pay. Open claims can still grow.
A loss run shows only claims reported to that carrier. Ask the seller, in writing, for incidents, demands and self-paid claims it may not show.
Underwriters, and the workers' compensation experience mod, generally weigh how often claims happen more heavily than one unusual large loss.
For each open claim, confirm who handles it, who pays any deductible, and whether your purchase agreement assigns it to the seller.

What is a loss run?

A loss run is a report from the insurer listing the claims on a policy, usually year by year, with what has been paid and what is still expected. There is one per carrier, and often one per line of coverage. A carrier with no claims to report usually still issues a loss run showing no losses. Do not confuse it with a "no known loss" letter, which the insured signs for a new carrier.

Every loss run has a valuation date: the day the numbers were pulled. Claim amounts change over time, so a loss run valued a year ago may understate what is now known. Underwriters often want loss runs valued within the last few months. For the basics of requesting one, see what a loss run is and how to get one.

How do you request loss runs after buying a business?

Who can ask depends on the deal structure.

Stock purchase. The company you bought is still the named insured on its policies, so you can usually request loss runs through the broker or directly from each carrier.
Asset purchase. The seller's policies stay in the seller's name. Carriers generally release loss runs to the named insured or its broker, so ask the seller to sign a short letter authorizing release to you or your broker.

Ask for five years, every line (general liability, auto, workers' compensation, property, umbrella and any professional, cyber or employment practices policies), from every carrier in that period, including any the seller left. For workers' compensation, also ask for the current experience rating worksheet, which lists the claims used to calculate your mod. In most states the National Council on Compensation Insurance (NCCI) produces it. Eleven states use their own rating bureaus, and four (North Dakota, Ohio, Washington and Wyoming) run state funds that sell workers' compensation directly.

Some states set deadlines. Florida requires insurers to provide a loss run statement within 15 calendar days of an insured's written request. The Florida statute does not require reserve figures, so if they are missing, ask the adjuster or broker for them separately. Oregon's rules require property and casualty insurers to make five years of loss runs available to commercial policyholders within 15 calendar days. Other states differ, so ask your broker about the rules where you operate.

What do the columns on a loss run mean?

Formats vary by carrier, but most loss runs carry these fields.

Common loss run fields and what to look for
Field	What it means	What to look for
Policy number and period	Which policy year the claim falls in	Gaps in years, or policies you did not know existed
Date of loss	When the injury, damage or incident happened	Whether it happened before or after closing
Date reported	When the insurer was told	Long delays between loss and report
Claimant and description	Who claimed and a short cause, such as slip and fall or rear-end collision	Repeating causes, locations, drivers or job types
Coverage or claim type	Bodily injury, property damage, medical only, lost time, collision and so on	Which parts of the business generate claims
Status	Open, closed or reopened	Old claims still open; closed claims that reopened
Paid	Amounts already paid, often split into indemnity (to the claimant), medical and expense (legal and adjusting)	Large expense amounts, which suggest litigation
Reserve or outstanding	What the insurer expects still to pay	Large reserves on old claims; reserves that keep rising
Total incurred	Paid plus reserve	The number underwriters usually start from
Earned premium and loss ratio	The premium earned for the policy year, and incurred losses divided by that premium	Years where losses ate up a large share of premium; underwriters compare losses with premium, not just claim counts
Recoveries	Money recovered from others, such as through subrogation	Whether net figures are shown

What do loss runs not show?

A loss run shows only claims reported to that carrier on its own policies. It can miss incidents the seller settled out of pocket, small claims handled inside a deductible or self-insured retention, incidents that were never reported, and years when a different carrier, or no carrier, covered that line. Ask the seller, in writing, for a list of known incidents, demand letters, lawsuits and self-paid claims for the same five years, and compare it with the loss runs. Anything known before closing but not reported may still need to be reported: under an occurrence policy, to the insurer whose policy was in force when it happened; under a claims-made policy, to the seller's insurer before the policy's reporting window, or any tail, closes. Ask your broker and deal counsel how to handle it.

What do open claims and reserves mean for you?

A reserve is the insurer's estimate of what an open claim will still cost. It is a judgment, not a bill, and it can rise or fall as facts develop. While a claim is open, its total incurred figure counts the reserve as if it were paid. NCCI's experience rating worksheet, for example, lists each claim's incurred amount and marks it open or final, so a large reserve on an open workers' compensation claim can push the mod up. If the claim later settles for less, that usually shows up only when a later rating uses a newer valuation, so ask your broker whether a revision is possible.

Which policy responds to an open claim depends on the policy, not on who owns the company now. An occurrence policy generally responds to injury or damage during its policy period, whenever the claim is made. Claims-made policies (common for professional liability, cyber and employment practices) work differently. They generally respond to claims first made while the policy is in force, subject to its retroactive date. So a claim about pre-closing work that arrives after closing may need a tail on the seller's policy or prior acts coverage on yours. See prior acts and tail coverage.

In a stock deal, the company you bought remains the insured, so its deductibles and claim duties stay with it. In an asset deal, a pre-closing claim usually belongs to the seller's policy, but the customers and employees involved are now yours. In some situations, state successor liability rules can also make a seller's liability follow the buyer, even if the purchase agreement says otherwise. Ask deal counsel how the indemnity terms apply; stock deal vs asset deal explains the split.

Which worries underwriters more: many small claims or one big one?

Usually many small claims (frequency) worry them more than one large claim (severity). NCCI explains that its experience rating plan gives greater weight to how often accidents happen than to how much each one costs, because many small claims signal a pattern while one large claim may be chance. The plan splits each claim at a dollar amount approved in each state's rate filing (the split point). The part below it (primary loss) counts more in the formula than the part above it, and each claim is also capped at a state limit per accident. In most states, medical-only claims count for less through an Experience Rating Adjustment. Some independent bureau states, such as California, use their own plans, while Indiana, Massachusetts and North Carolina use NCCI's plan even though they have their own bureaus. Liability and auto underwriters reason in a similar way, though each carrier has its own approach.

Underwriters also compare incurred losses with premium (the loss ratio) year by year. A high ratio usually means harder renewal terms, whatever the claim count, though each carrier sets its own threshold.

Loss run patterns and how underwriters often read them
Pattern on the loss run	How underwriters often read it	What to prepare
Many small claims of the same type	A process or training problem likely to continue	The cause and what you changed, with dates
One large claim, otherwise clean	Possibly unlucky, if the cause is explained	A short narrative and proof of the fix
Old claims still open with big reserves	Uncertainty that can affect pricing	Status from the adjuster and any settlement plan
Claims rising year over year	A worsening trend, often weighted toward recent years	Context such as growth in payroll or vehicles
Clean history but small premium base	Limited data to rely on	Safety programs and operating details

A new owner can change how this history is read by showing what is different now: new safety rules, driver standards, hiring practices or management. See what underwriters want to see from a new owner.

What should a new owner do about inherited open claims?

Work through each open claim with this checklist:

List every open claim across all loss runs, with the adjuster's name and contact details.
Confirm who handles it. The insurer's adjuster or a third-party administrator (TPA) manages the claim; tell them who your contact is now.
Confirm who pays any deductible or self-insured amount, and check the purchase agreement for what the seller agreed to cover.
Preserve records. Keep incident reports, emails, photos and personnel files the seller left behind.
Support a safe return to work where the employee's doctor allows it; it can be one of the main levers on workers' compensation claim costs. Coordinate with the adjuster, and ask employment counsel about any accommodation or leave duties. See return to work and claim cost control.
Ask about reserves that look out of line with the facts, and request an update before renewal.
Check the mod worksheet for claims that are misreported or belong to another business. See how to check your experience mod for errors.

A hypothetical example. A buyer who acquired the shares of an $8 million revenue building supply distributor reviews five years of loss runs. There are twelve claims. Ten are small, closed auto claims, eight involving backing incidents at customer docks. Two are open workers' compensation claims, one with a $150,000 reserve from a back injury two years ago. The buyer does four things:

Adds backup cameras and a spotter rule.
Asks the adjuster for a status update on the large claim.
Confirms with deal counsel that the seller agreed to cover the deductible on pre-closing claims.
Writes a one-page loss narrative for the renewal submission.

Steps to settle and close old claims are covered in closing old open claims.

Morrow can review the loss runs you inherited alongside your policies and help shape the loss narrative for renewal; any new terms depend on carrier underwriting.

Keep reading

Frequently asked questions

How many years of loss runs should I ask for?

Five years for every line of coverage is the common request, from every carrier that insured the business during that time. Ask for a recent valuation date so the figures are current.

What is the difference between paid and incurred on a loss run?

Paid is what the insurer has already spent on a claim. Incurred is paid plus the reserve, which is what the insurer expects still to pay. Underwriters usually look at incurred, so an open claim with a big reserve counts even before it is paid.

Can the seller's claims raise my premium?

Often, yes. When you buy a business, its claims history usually follows the business. Under NCCI rules the workers' compensation experience mod generally transfers too, including in asset purchases where you take over the seller's operations, and independent bureau states have similar rules. Underwriters price that history, though a new owner can show what has changed.

Who handles open claims from before I bought the business?

The insurer whose policy responds keeps handling the claim through its adjuster. Who pays deductibles and other costs depends on the deal structure and your purchase agreement, so ask deal counsel and tell the adjuster who your contact is now.

Why does a claim show up that I never heard about in diligence?

Loss runs list every reported claim, including small ones the seller may not have thought to mention, and claims can be reported months after the incident. Ask the seller and the adjuster for the facts, check whether it happened before closing, and see what your purchase agreement says about undisclosed claims.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

How to Read Loss Runs After You Buy a Business