ATTACHMENT C - Kentucky Claims Report Explanation 2025 - RFB 758 2600000247.pdf
PDF 192 KB Posted
- Attached to
- KREC Errors & Omissions Insurance Policy
- Solicitation number
- RFB 758 2600000247 2
- Issued by
- Elliott County, Kentucky
About this file
This document is an explanatory report from RISCO, a division of Accretive Specialty Insurance Solutions, LLC, regarding Kentucky Group Policy Claims data for the Kentucky Real Estate Commission as of the Second Quarter 2025. The report provides a comprehensive overview of errors and omissions (E&O) insurance claims across Kentucky group program policies since 2015, detailing closed and open claims counts, total paid amounts for closed claims (broken into loss payments and legal fees), open claims incurred amounts, and total claims counts with associated incurred amounts. The report emphasizes that real estate E&O claims typically require multiple years to close, with some claims from the 2016 policy period still remaining open, which means final claim costs cannot be accurately determined until closure and all related expenses are settled.
The report notes that the Kentucky Real Estate Commission should expect that legal fees typically exceed loss payments in this line of business, which is considered standard industry experience. A key feature highlighted is that the group policy provides unlimited defense cost coverage, with these costs paid in addition to the stated policy limits. The report cautions that the loss data does not include Incurred But Not Reported (IBNR) claims, loss development factors applied by actuaries, or administrative costs for program management and claims adjustment—all of which are incorporated into premium calculations for future policy years. As claims mature, loss data becomes more reliable, allowing for improved accuracy in future premium determinations and loss projections.
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P.O. Box 6709 Louisville KY 40206 www.risceo.com Phone 502.897.1876
435 N. Whittington Parkway, Louisville, KY 40222 A Division of Accretive Specialty Insurance Solutions, LLC Fax 502.897.7174
Kentucky Claim Report Explanation - 2025
The Kentucky Real Estate Commission has been provided a copy of the Group Policy Claims Reports for the Second Quarter 2025. These reports include data for each Kentucky group program policy since 2015.
The Summary report shows the number of claims reported each year and the number currently open and closed. It also shows the total incurred amount per year on this report. This report shows each group policy number and lists the Closed Claims Count, Total Paid for Closed Claims (which breaks out Loss payments and Legal payments), Open Claims Count, Total Incurred for Open Claims (which breaks out Loss incurred amounts and Legal incurred amounts), Total Claims Count and Total Incurred Amounts.
Since real estate E&O claims typically take years to close (for example we still have open claims from the 2016 policy period), the true cost of a claim cannot be determined until the claim has been closed and all related expenses have been paid. As a general rule, the claims that take longer to close tend to be the claims that cost more (since legal fees continue to incur until the claim is closed).
On this report, keep in mind it is unclear if amounts paid out for the more recent years will be more or less than prior years. An actuary will review the loss history and apply factors for continued development in order to calculate the premium needed for future years. As the claims mature, the loss data is more reliable, so we will know more about the current periods as time goes on.
You will note that we typically spend more on Legal Fees than we do on Loss Payments. This is typical in our experience for this line of business. One of the most valuable features of a real estate E&O policy is the defense cost coverage. There is no limit on the amount of defense costs under the group policy.
The amounts are paid in addition to the limits stated on the group policy.
Please note the Loss Reports do not include any IBNR (Incurred But Not Reported) or Loss Development (a factor used by the actuaries to determine the ultimate loss incurred) or any Administrative Costs (costs of the insurer to provide the program, including their staffing costs and expense allocations, administration, marketing and claims adjustment costs). All of these factors are considered in the premium calculation for a program.
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