How does LORAN calculate the Suggested Retention?

The Summary page of LORAN's PowerBI Interactive report contains a Suggested Retention value: 

The Suggested Retention value considers the frequency and variation of incurred amounts in the loss data. It should be considered as a starting point in determining an appropriate retention for an insured.

This “rough estimate” is calculated by summing the squared incurred losses for each claim and then dividing by the sum of the incurred losses.

We recommend reviewing the “What-If Retention Analysis” on LORAN’s Deductible Analysis page (shown below) for more detailed insights on both claims captured and retained losses at other retention levels.

As a reminder, LORAN does not provide any development on claims.  For a more accurate deductible selection, we suggest using the Loss Forecaster tool and forecasting at various deductibles, as shown in this Lunch and Learn Video: https://www.risk66.com/training/52