Loss ratio

The loss ratio compares incurred claims to earned premiums over a given period. It measures the share of premium consumed by the pure cost of risk, before administrative and acquisition expenses are taken into account. It is the first building block of the combined ratio and the most direct indicator of a portfolio's underwriting quality. The incurred claims figure includes not only paid claims but also reserves for losses already occurred, including those not yet reported, which makes the ratio sensitive to reserving assumptions. This sensitivity is precisely the point requiring vigilance: a flattering loss ratio in a recent year may deteriorate sharply once late claims materialize, a frequent phenomenon on long-tail lines such as liability. A distinction is often drawn between the gross loss ratio, before reinsurance, and the net ratio, after cession, the gap revealing how effective the reinsurance protection is. In cyber, the loss ratio's volatility from one year to the next is high, reflecting the youth and correlated nature of the risk.

A line shows a gross loss ratio of 70 percent; after reinsurance absorbs the peak losses, the net loss ratio falls to 58 percent, showing the protective effect of the cession.

ratio de sinistralité, S/P, sinistres sur primes