Users often receive this error as a result of a data entry mistake such as entering a single large loss twice or keying in an incorrect value. You can review the large loss entries by either selecting the appropriate drop-down arrow or by simply selecting the print icon to print all large losses.
If a data entry error is not immediately obvious, then you may need clarification of exactly what data should be entered on the Excess of Limit Data Input screen. This error message occurs when the limited case reserves are negative, that is, when the limited paid losses exceed limited incurred losses.
Just as it does with reported incurred and paid losses on the Data Input screen, Loss Forecaster checks to ensure that limited incurred losses are greater than or equal to limited paid losses on the Excess of Limit Data Input screen. Another way to think of this is that Loss Forecaster checks to ensure that outstanding case reserves (incurred losses less paid losses) are not negative. For instance, a claim with an incurred value of $100 and a paid value of $80 will have a $20 outstanding case reserve.
The key to understanding this error message is to understand the calculation of limited losses. Limited losses are computed by removing any excess losses (losses beyond the per occurrence loss limit) from reported losses. For example, assuming a $100 per occurrence loss limit and policy year losses of $5, $50, and $500, would yield:
Reported Losses: $555 (5 + 50 + 500)
Excess Losses: -400 (500 - 100) for single claim above loss limit
Limited Losses: $155
This calculation holds for either incurred or paid losses. Again, the following is a brief example:
Reported Incurred Losses: $1,555 (5, 50, 500, and 1,000)
Reported Paid Losses: $1,065 (5, 50, 10, and 1,000)
Reported Case Reserves: $490 (1,555 - 1,065)
Excess Incurred Losses: $1,300 (500 - 100 and 1,000 - 100)
Excess Paid Losses: $900 (1,000 - 100)
Limited Incurred Losses: $255 (1,555 - 1,300)
Limited Paid Losses: $165 (1,065 - 900)
Limited Case Reserves: $90 (255 - 165)
Two important notes should also be mentioned regarding the data entry of large losses within the Excess of Limit Data Input screen. First, the entire amount of the large loss should be entered, not just the excess. In the $500 loss sample above, the user would enter the $500 loss amount (not the $400 excess) on this screen. Second, there may not be a large paid loss for every large incurred loss. In the $500 incurred loss sample above, the paid loss is only $10 so the user would input a $500 incurred large loss but no paid large loss.