Loss Runs

Loss runs are the insurance industry's standard report listing every claim filed against the company's policies over the past five to seven years. The buyer's risk team pulls them in the first week of diligence. Each claim shows the date, the type, the current status, and the amount the carrier has reserved against it. Loss runs tell the buyer three things: what has gone wrong in the past, what is still unresolved, and whether the seller has disclosed everything accurately. The most dangerous finding is not a large claim — it's a claim the seller forgot to mention. An open workers' comp claim the founder believed was resolved, a carrier reserve the founder didn't know existed, or an undocumented payment related to an active claim all signal the same thing: the seller's disclosure process is unreliable. One undisclosed claim costs more than three disclosed claims, because the buyer prices it as evidence that other exposures might exist. Founders who pull their own loss runs before going to market know exactly what the buyer is going to find.