PDSnet Glossary

Term

Categories

Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

Versions

Name	synonyms = 1, variations = 2, abbreviations = 3

Publish: (0 = no, 1 = yes)

Definition

A ratio used by the insurance industry to determine its profitability. The ratio is the total of claims as a percentage of insurance premiums earned. Santam breaks the definition down further: "The net claims ratio expresses claims net of recoveries from reinsurers as a percentage of premiums net of premiums ceded to reinsurance. The gross claims ratio reflects the position before reinsurance is taken into account. Also referred to as loss ratios." Obviously, where there is a major disaster, short-term insurers stand to make a significant loss. Insurance companies have actuaries to calculate the risk of sich a disaster and ensure that their premiums are high enough to cover it over time.

Edit Glossary Term