My client has acquired another company. Would separate or combined loss projections be best?

Generally speaking, we would recommend combining the loss information from each acquired entity with that of the acquiring entity when creating a loss projection analysis in Loss Forecaster.  However, there are a few potential factors that you may want to be aware of when compiling the data:

• In order to achieve accurate results, you will also need to combine the exposure information from each acquired entity.  Otherwise, the pure loss rates that Loss Forecaster calculates will be based on a comparison of loss experience from all entities and exposure information from just the acquiring entity.

• You may also run into potential issues with differing policy periods between each entity.  For example, the acquiring entity may have policy periods based on calendar year, whereas one of the acquired entities may have policies that incept 6/1.
  • In this scenario, we would recommend summarizing the loss and exposure data using a single, consistent policy period.  Typically, this matches the period of the acquiring entity.  So, in the example above, you would summarize the loss data for each entity based on calendar year before combining everything.

• One final note that I wanted to mention is to ensure that the fields from each loss run have consistent definitions of loss.  As an example, a loss run for one entity may have incurred and paid loss fields which are net of recoveries, but another may use incurred and paid loss fields gross of recoveries.
  • With that in mind, I would recommend a quick review of each loss run that you'll be using for the analysis, just so you have a clear picture of what each loss run contains and how the incurred and paid losses are defined.