What are paid losses in the context of insurance?

Paid losses refer specifically to the actual amount of money that an insurance company has disbursed in response to claims during a defined period. This figure reflects completed transactions where claims have been settled and the payments made to policyholders or other beneficiaries. It provides a clear and factual measure of the company's financial outflow related to claims, differentiating between potential future payments and realized expenditures.

Understanding paid losses is crucial for insurance companies as it influences their cash flow management, reserves, and overall financial health. In the context of calculating profitability and evaluating risk exposure, knowing the actual paid losses helps in assessing past performance and making informed predictions about future liabilities.

The other options involve estimates or projections related to claims but do not describe the actual disbursement of funds. For instance, estimates of amounts expected to be paid in the future refer to potential liabilities rather than actual transactions. Total losses that will be paid when claims are finalized include projected payments but are not yet realized expenditures. Reserves placed on individual claims represent anticipated future outflows rather than payments that have already been processed.