📉 Loss Ratio Calculator
Gauge insurance profitability by comparing incurred losses with earned premiums.
How to Use This Calculator
Gather Loss Data
Use incurred losses from the same underwriting period, including paid claims and reserve changes.
Enter Earned Premiums
Use earned (not written) premiums for the same time period to ensure apples-to-apples comparison.
Adjust for Reinsurance (Optional)
Input ceded premiums and losses to evaluate net performance after reinsurance treaties.
Analyze Results
Compare gross and net loss ratios to understand underwriting profitability and protection from reinsurance.
Formula
Loss Ratio = Incurred Losses ÷ Earned Premiums × 100
Net Loss Ratio = (Incurred Losses − Ceded Losses) ÷ (Earned Premiums − Ceded Premiums) × 100
Underwriting Balance = Earned Premiums − Incurred Losses
The loss ratio is a core component of the combined ratio. A ratio below 60% is typically considered healthy, leaving room for expenses and profit. Values above 100% indicate losses exceed premiums received.
Full Description
Loss ratio is one of the most closely watched metrics in insurance. It shows the relationship between claims cost and premium income, revealing whether underwriting is profitable before considering operating expenses or investment income.
Actuaries, underwriters, and analysts rely on this metric to adjust pricing, identify loss drivers, and evaluate reinsurance strategies. Loss ratios can be measured by line of business, geography, broker, or policy cohort to isolate areas requiring attention.
Why It Matters
- Provides an early warning signal for deteriorating underwriting performance
- Supports capital allocation and reinsurance purchasing decisions
- Highlights over- or under-priced segments for rate adjustments
- Influences insurer financial ratings and investor confidence
For more accurate insight, review loss ratios alongside claim frequency, severity, and exposure changes to understand the underlying drivers.
Frequently Asked Questions
What is a good loss ratio?
Most property & casualty lines target 55–70% depending on expense structure. Ratios consistently above 80% may signal the need for rate increases or underwriting changes.
Why use incurred losses instead of paid?
Incurred losses include both paid claims and changes to reserves, capturing the expected ultimate cost of claims and providing a more complete view of profitability.
How often should I calculate loss ratios?
Many carriers track monthly and quarterly for emerging trends, with deeper annual reviews at renewal time.
Does the ratio include LAE?
You can include loss adjustment expenses (LAE) in incurred losses if desired. Some teams calculate separate ratios for losses and LAE to pinpoint expense drivers.