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📊 '''Paid loss''' represents the total amount of money an [[Definition:Insurance carrier | insurer]] has actually disbursed to settle [[Definition:Claims | claims]] over a given period, as opposed to amounts that have been [[Definition:Loss reserve | reserved]] or estimated but not yet paid out. In insurance [[Definition:Financial reporting | financial reporting]], the distinction between paid losses and [[Definition:Incurred loss | incurred losses]] — which include both paid amounts and outstanding [[Definition:Case reserve | case reserves]] — is fundamental to understanding a company's cash flow position and the maturity of its [[Definition:Claims | claims]] portfolio.

💵 When a [[Definition:Policyholder | policyholder]] files a claim and the [[Definition:Claims adjuster | adjuster]] reaches a settlement, the funds transferred to the claimant are recorded as a paid loss. In lines with short [[Definition:Tail (insurance) | tails]] — such as [[Definition:Property insurance | property insurance]] — the gap between [[Definition:Loss occurrence | loss occurrence]] and payment is typically narrow, so paid losses track closely with incurred losses. In [[Definition:Long-tail liability | long-tail lines]] like [[Definition:Workers' compensation insurance | workers' compensation]] or [[Definition:Professional liability insurance | professional liability]], years can pass before a claim is fully resolved, meaning paid losses at any reporting date may represent only a fraction of the ultimate cost. [[Definition:Actuarial analysis | Actuaries]] use paid loss development triangles to project how current paid figures will evolve as open claims close, helping refine [[Definition:Ultimate loss | ultimate loss]] estimates.

🔎 Tracking paid losses carefully is essential for both internal management and external scrutiny. [[Definition:Reinsurance | Reinsurance]] contracts frequently define trigger points and attachment thresholds in terms of paid losses, particularly under [[Definition:Excess of loss reinsurance | excess-of-loss]] treaties where recoveries are only activated once the [[Definition:Ceding company | cedant]] has actually disbursed funds above a specified retention. Investors and [[Definition:Rating agency | rating agencies]] examine paid-to-incurred ratios to gauge whether an insurer's reserves are developing favorably or if there is a pattern of [[Definition:Reserve deficiency | reserve deficiency]] masking future cash demands. From a [[Definition:Liquidity risk | liquidity]] standpoint, sudden spikes in paid losses — after a [[Definition:Catastrophe | catastrophe]], for instance — can strain an insurer's available assets, making the timing and pattern of loss payments a critical component of [[Definition:Cash flow management | cash flow management]].

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Incurred loss]]
* [[Definition:Loss reserve]]
* [[Definition:Loss development triangle]]
* [[Definition:Case reserve]]
* [[Definition:Ultimate loss]]
* [[Definition:Paid-to-incurred ratio]]
{{Div col end}}

Definition:Paid loss - Revision history

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