Loss ratio

The loss ratio is used in the insurance industry, which represents the ratio between losses and earned premiums. Losses in loss ratios include paid insurance receivables and adjustment costs. The formula for loss ratio is paid insurance receivables plus adjustment costs divided by total earned premiums. For example, if a company pays SEK 80 in receivables for every SEK 160 in collected premiums, the loss ratio would be 50%.

Also see: Combined Ratio

What is loss reserve?

Reserves - also called retained earnings - are parts of a company's profits that have been set aside to strengthen the company's financial position. Loss reserve is an estimate of the value of a receivable or group of receivables that have not yet been paid.