Actuarial & Insurance

Basic

Loss Ratio

Claims paid divided by premiums earned.

Formula

LR = \frac{C}{P}

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Variables

LRLoss ratio

CClaims paid

PPremiums earned

Example

$7M claims on $10M premium: LR = 70%

Did You Know?

A loss ratio above 100% means an insurer is paying out more in claims than it collects — unsustainable without reserves.

actuarial loss ratio insurance

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More in Actuarial & Insurance

Pure Premium

Expected claim cost per policy: frequency times severity.

Gross Premium

Premium that covers claims plus an expense/profit load.

Combined Ratio

Total cost ratio: losses plus expenses vs premium.

Expected Value of a Claim

Probability-weighted average of possible claim amounts.

Present Value of an Annuity

Value today of a stream of future payments.

Future Value of an Annuity

Accumulated value of regular contributions.