Loss Ratio
Definition
The percentage of premiums collected that an insurer pays out in claims. A loss ratio of 60% means the insurer pays $60 in claims for every $100 in premiums collected. Regulators monitor loss ratios to ensure insurers are not charging excessive premiums. A very high loss ratio can indicate an insurer is at risk of financial difficulty.
When This Matters
An insurer with a homeowners loss ratio of 85% in Florida is paying out $85 in claims for every $100 in premiums, indicating significant storm losses.
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