# insurance.loss-ratio

The three headline underwriting ratios for a period, in basis points
(6500 = 65%):

- **loss ratio** = incurred claims / earned premium
- **expense ratio** = expenses / earned premium
- **combined ratio** = (incurred claims + expenses) / earned premium

Below 10000 (100%) the book made an underwriting profit.

## Choices

- Everything is over **earned** premium, the usual UK and IFRS 17 practice
  and what most published combined ratios use. US statutory reporting puts
  expenses over *written* premium instead; for that, call this twice or work
  the expense ratio with `math.round-div` directly.
- The combined ratio is worked from the totals and rounded once, not by
  adding two rounded ratios, so it can differ by one basis point from their
  sum (1.00 and 1.00 on 3.00: 33.33% + 33.33%, combined 66.67%). If a report
  must add up, show the combined ratio from this and derive the display of
  the others from it, not the other way round.
- Incurred claims may be negative in a period where reserve releases
  outweigh new claims (see `insurance.claim-reserve` for incurred
  movements), and the ratio is then negative rather than refused.
- Earned premium must be more than zero: a ratio over nothing is undefined.
- What counts as an expense (commission, acquisition costs, claims handling
  costs) is the caller's reporting policy.