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Combining ALAE with losses is often similar to
combining two non-homogenous lines of business.
Separate analyses of loss and allocated loss adjustment
expense are also necessary to allow for monitoring of
actual experience versus projected experience for each
component.

The ALAE can be further split into subcategories, The
most important subcategory is attorneys' fees and court
costs. It will often be conducive to obtaining better
estimates of loss adjustment expense to develop legal
expense separate from all other allocated expense items.

Case reserve estimates sometimes are not established
for allocated loss adjustment expenses. This means that
the actuary only has paid allocated expenses to work
with. The allocated expense reserve is established on a
bulk basis by actuarial estimates, or may be spread to
cases by some formula approach.

In either case, allocated paid amounts are the only
meaningful history available for the analysis. A common

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