Insurance Terminology Loss Ratio

Key takeaways loss ratio is the losses an insurer incurs due to paid claims as a percentage of premiums earned.

Insurance terminology loss ratio. If for example a firm pays 100 000 of premium for workers compensation insurance in a given year and its insurer pays and reserves 50 000 in claims the firm s loss ratio is 50 percent 50 000 incurred losses 100 000 earned premiums. A high loss ratio can be an indicator of financial distress especially for a property or casualty insurance company. 1 a provision under which an insured who carries less than the stipulated percentage of insurance to value will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required. It reflects whether the company is collecting enough premiums to meet its obligations and operational commitments or under charging to the point of operating at a loss.

Risk based capital rbc ratio ratio used to identify insurance companies that are poorly capitalized. The loss ratio is generally used in the insurance industry and is expressed as a percentage representing the ratio of losses incurred in claims plus adjustment expenses relative to the premiums earned during the period. This ratio measures the company s underlying claims results or loss experience on its total book of business. Calculated by dividing the company s capital by the minimum amount of capital regulatory authorities have deemed necessary to support the insurance operations.

Insurers will calculate their combined ratios which include the loss. In practical terms self funded employers pay for each claim as it is presented instead of paying a fixed premium to an insurance carrier for a fully insured plan. Loss ratio the ratio of incurred losses and loss adjustment expenses to net earned premium. The loss ratio is the percentage of the total claims paid by an insurance company in relation to the total premiums received during the course of a year.

This catalogue of credit insurance terminology aims at clarifying most of these terms and is for the benefit of anyone not familiar with credit insurance but also as an. Excess of loss 62 exchange risk 52 expense ratio 65 export credit insurance 40 index. 8 exposure 65 expropriation 52 extension of due date 47 extension period 47 fac28. 2 a policy provision frequently found in medical insurance by which the insured person and the insurer share the covered losses under a policy in a specified ratio i e 80 percent by the insurer and 20 percent by the insured.

Loss ratio proportionate relationship of incurred losses to earned premiums expressed as a percentage.