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#1




Loss Ratio
May I ask for a bit of input in respect of loss ratios?
The formula I have is incurred claims / earned premium. I only have access to revenue account and balance sheet data, which includes claims paid, claims reserves, gross premium and unearned premium reserves. Using this information, how can I obtain the correct numerator and denominator to calculate the loss ratio? So in other words how do I convert paid claims to incurred claims? And how also do I convert gross premium to earned premium? Kind regards, BR 
#3




Thank you.
Yes I mean gross premium = written premium. I read somewhere the following: Earned premium = written premium  change in unearned premium reserve. Incurred claims = paid claims + change in claims reserve. Is this also correct? Why is it correct (if it is correct)? Regards, Ben 
#5




Quote:
Your formulas should be used if you are dealing with calendar period data. 
#7




Quote:
Year 1: Beginning UPR = 0 Beginning Claims Reserve = 0 Company opens for Business in July, and writes one anuual policy 7/1 for 100 dollars. They experience a claim initially reserved for 75 dollars, of which they pay 15 dollars on 12/1, and decrease the outstanding reserve correspondingly to 60 dollars. Year Ending UEPR = 100/2 = 50 Year 1 WP = 100 Year 1 EP = (100(500)) = 50 Year Ending Claims Reserve = 60 Year 1 Paid Claims = 15 Year 1 incurred loss = 15 + (600) = 75 Year 1 Loss Ratio = 75/50 = 1.5 Year 2: Beginning UEPR = 50 Beginning Claims Reserve = 60 The company decides to double their premium to account for the poor Loss Ratio in the prior year. The 7/1 policy renews at 200 dollars. They pay the remaining 60 dollars and close the original claim (reserve set to 0). They get a new claim of 80 dollars and they pay 35 of it on 12/1. Ending UEPR = 100 Year 2 WP = 200 Year 1 EP = 200  (10050) = 150 (50 dollars from last years policy and 100 dollars from this years) Ending Claims Reserve = 45 Year 2 Paid claims = 60 + 35 = 95 Year 2 Incurred Loss = 95 + (45  60) = 80 Year 2 loss ratio = 80/150 = .533 
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