Insurance Expense Ratio Calculator
Property and casualty insurers measure underwriting performance with three ratios. The expense ratio shows the share of premium spent running the business, the loss ratio shows the share paid out in claims, and the combined ratio adds the two to reveal whether underwriting was profitable. This calculator takes underwriting expenses, incurred losses, and premium, then returns the expense ratio, loss ratio, combined ratio, and the underwriting margin. Use it to compare carriers or track a book of business over time.
Insurance ratio formulas
Expense ratio % = underwriting expenses / premium * 100
Loss ratio % = incurred losses and LAE / premium * 100
Combined ratio % = expense ratio + loss ratio
Underwriting margin % = 100 - combined ratio
A combined ratio below 100 percent indicates an underwriting profit before investment income. LAE is loss adjustment expense. Statutory reporting may use different premium bases per ratio.
Things to know
- By convention the expense ratio often uses written premium and the loss ratio earned premium.
- The combined ratio is the headline underwriting profitability measure for P and C insurers.
- Below 100 percent is an underwriting profit; above 100 percent is an underwriting loss.
- Insurers also earn investment income, so a ratio just over 100 can still be profitable overall.
- Follow NAIC annual statement conventions for formal statutory ratio reporting.
Insurance ratios: frequently asked questions
What is the expense ratio in insurance?
The expense ratio measures an insurer's underwriting expenses (commissions, salaries, administration, and other acquisition and general costs) as a percentage of premium. A common convention divides underwriting expenses by net written premium. It shows how much of each premium dollar goes to running the business rather than paying claims.
What is the difference between expense ratio and loss ratio?
The loss ratio is incurred losses plus loss adjustment expenses divided by earned premium, showing the share of premium paid out in claims. The expense ratio covers the cost of writing and servicing the business. Together they form the combined ratio, the headline measure of underwriting profitability.
What is the combined ratio and what does it mean?
The combined ratio is the loss ratio plus the expense ratio. Below 100 percent means the insurer made an underwriting profit before investment income; above 100 percent means an underwriting loss. It is the standard profitability metric used in regulatory and rating analysis.
Why are premium bases sometimes different?
By convention the expense ratio often uses net written premium while the loss ratio uses earned premium. This calculator lets you enter premium and uses it consistently for a simplified combined ratio. For formal statutory reporting, follow the NAIC annual statement conventions for each ratio's premium base.
Is a lower combined ratio always better?
A lower combined ratio means stronger underwriting profitability, but insurers also earn investment income on reserves, so some run combined ratios slightly above 100 percent and still profit overall. Within a line of business, a consistently lower combined ratio signals disciplined pricing and expense control.
Official sources
- National Association of Insurance Commissioners: NAIC annual statement and ratio guidance.
- Casualty Actuarial Society: CAS ratemaking literature.
Reviewed by the CalculatorHub team, edited by James Graham, 17 June 2026. See our methodology.