Net loss ratio
Loss ratio computed on net-of-reinsurance losses and premiums, reflecting the cedant's actual performance after risk transfer.
The net loss ratio divides net losses (gross less reinsurance recoveries) by net premiums (gross less ceded premiums). It measures the cedant's effective loss experience after its reinsurance program responds. Comparing net to gross loss ratio quantifies reinsurance effectiveness: a sharply lower net ratio in a catastrophe year confirms the XL program has worked. Conversely, if both ratios are close, reinsurance was barely triggered. The net loss ratio can paradoxically exceed the gross ratio when the cedant cedes profitable business (on a quota share, it cedes the good years too).
Textbook case: after Cyclone Belal, in January 2024, the gross loss ratio comes in at 145% and the net loss ratio at 82%. The cat XL program absorbed 63 ratio points.
net loss ratio, net claims ratio, loss ratio net of reinsurance
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