Word of the Quarter

By July 12, 2012Uncategorized

ALAE (Allocated Loss Adjustment Expense)

Allocated Loss Adjustment Expense (ALAE) represent expenses directly attributable to settling and defending specific claims. These expenses include salaries of adjusters, legal fees, court costs, expert witnesses, and investigation costs. Wrap-up insurance programs will have different ALAE options. These different options will erode the insured’s retention and basket aggregate in different ways, so selecting the correct ALAE option is a major consideration when marketing and selecting wrap policies. As seen below, the diagram shows how different ALAE options affect retentions and aggregates: