Combined Ratio Calculator

How it is calculated

The tool expresses an insurer's costs as a share of the premium it has earned: loss ratio = incurred losses ÷ earned premium × 100, expense ratio = expenses ÷ earned premium × 100 and combined ratio = (incurred losses + expenses) ÷ earned premium × 100, which equals the sum of the other two. All three inputs are amounts in the same currency and for the same period, usually a year. Earned premium must be above zero and losses and expenses cannot be negative, otherwise no result is shown. A combined ratio under 100% is an underwriting profit and over 100% an underwriting loss. It excludes investment income, reinsurance effects and tax, and different companies group some costs differently, so compare ratios only when the definitions match.

Common mistakes

• Using written premium instead of earned premium. Earned premium is the part of premiums that belongs to the period already elapsed, and the two can differ a lot for a growing book.
• Using paid claims instead of incurred losses. Incurred losses include changes in reserves for claims not yet settled, so paid-only figures can make the ratio look better than it is.
• Reading 91% as a 91% profit. It is the cost per unit of premium, so the underwriting margin is 100% − 91% = 9%, before investment income.
• Mixing periods, such as annual losses against a single quarter of premium. All three inputs must cover the same period.
• Entering a negative loss figure after a large recovery. Negative losses or expenses give no result, so net the recovery into the incurred figure and enter the total instead.