Expected Loss Ratio Calculator

Calculate an expected loss ratio by dividing selected expected losses by earned premium for the same exposure period.

Description

Calculate a selected expected-loss amount as a proportion of earned premium for the same exposure period.

Expected Loss Ratio helps you calculate a selected expected-loss amount as a proportion of earned premium for the same exposure period.

Use this ratio calculator to express an a priori loss expectation relative to premium. The result can support planning, pricing diagnostics, and expected-loss reserving inputs when the numerator is genuinely an expected loss selection.

When to use Expected Loss Ratio

How the calculation works

Divide expected losses by positive earned premium. The result is returned as a decimal: 0.70 corresponds to 70 percent, while a value above one means expected losses exceed earned premium before expenses.

Expected loss ratio = expected losses / earned premium ^[1]

Inputs and interpretation

The numerator and denominator must cover the same policies, exposure period, currency, and accounting basis. Enter expected—not merely observed incurred—losses if the result is to be called an expected loss ratio.

Assumptions and limitations

This arithmetic does not establish that the expectation is credible or that premium is adequate. It excludes expenses and profit and can be distorted by premium on-level changes, trend, mix shifts, catastrophe assumptions, and inconsistent loss definitions.

References

Bornhuetter-Ferguson Initial Expected Loss Ratio Working Party Paper — Casualty Actuarial Society