Insurance Loss Ratio Calculator
The loss ratio tells you what share of premium an insurer pays out in claims. It is incurred losses plus loss adjustment expense, divided by earned premium. This calculator takes those figures and returns the loss ratio as a percentage, the key gauge of how a line of business is performing before underwriting expenses are added.
Loss ratio formula
Loss ratio = (incurred losses + loss adjustment expense) / earned premium * 100
Premium retained = 100 - loss ratio
To exclude loss adjustment expense, set that input to zero. Premium retained is the share of premium left to cover underwriting expenses and profit.
Reading the result
- The loss ratio is the percentage of earned premium absorbed by claims and their settlement.
- Premium retained is what remains before underwriting expenses.
- Combine with the expense ratio to get the combined ratio, the fuller profitability gauge.
- Use earned, not written, premium so losses and premium cover the same period.
Loss ratio: frequently asked questions
What is a loss ratio?
The loss ratio is the share of earned premium that an insurer pays out in claims and the cost of settling them. It is incurred losses plus loss adjustment expense, divided by earned premium, expressed as a percentage. A 70% loss ratio means 70 cents of every premium dollar went to claims.
What is loss adjustment expense?
Loss adjustment expense (LAE) is the cost of investigating, defending, and settling claims, such as adjuster fees and legal costs. It is added to incurred losses because it is part of the true cost of paying claims. Some loss ratios include LAE and some exclude it; this tool lets you add it as a separate input.
What is a good loss ratio?
Lower loss ratios leave more premium to cover expenses and profit, but an extremely low ratio can signal overpriced cover. Insurers also watch the combined ratio, which adds underwriting expenses to the loss ratio. A loss ratio alone does not show whether a line is profitable.
Is loss ratio based on earned or written premium?
Loss ratio uses earned premium, the portion of premium that corresponds to coverage already provided, so that losses and premium cover the same period. Using written premium, which includes coverage not yet earned, would distort the ratio. Enter earned premium for a correct result.
Sources and method
- The loss ratio is the standard underwriting identity: incurred losses plus loss adjustment expense over earned premium. All inputs are user-editable; no figure is hardcoded.
- National Association of Insurance Commissioners: NAIC for insurance financial reporting concepts.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.