Free · Insurance financial ratios

Insurance Loss Ratio Including Adjustment Expenses

Calculate incurred claims plus loss-adjustment expenses as a share of positive earned premiums.

Formula & worked example
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How to use this calculator

Enter the known values in the units shown. Results update as you type.
Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

Claims of 600 and adjustment expenses of 100 against earned premiums of 1,000 give a loss ratio of 70%. It leaves 30% before other underwriting costs.

Loss ratio = (incurred claims + loss-adjustment expenses) / earned premiums

Worked example

Enter these known values and leave the other values blank.

Incurred claims: 600 USD
Loss-adjustment expenses: 100 USD
Earned premiums: 1000 USD

Loss ratio including adjustment expenses: 70 %

Assumptions and limitations

Claims and adjustment expenses must be nonnegative, and earned premiums must be strictly positive.
Use the same period and matching gross or net-of-reinsurance amounts for all inputs.
Definitions may include or exclude particular adjustment expenses. This model includes the entered adjustment amount and excludes other underwriting expenses.
Use consistent currencies, periods and amount scales. Currency selectors use fixed captured exchange rates, not current market rates.

Common questions

Does a loss ratio under 100% mean underwriting profit?

Not necessarily. Commissions and other underwriting costs also need to be covered.

How is this different from the combined ratio?

The combined ratio also includes underwriting expenses, with premium-basis conventions that should be checked.

References

Require positive earned premiums and nonnegative loss ratios; contextual notes distinguish loss costs from full profitability.

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