Definitions for "Incurred Loss Ratio"
The ratio of the losses incurred to premiums earned.
Percentage of each premium dollar an insurer spends on claims. An insurance company's Incurred Loss Ratio is ratio of the earned premiums divided by the amount of incurred losses. It provides a measure or indicator of the company's performance and adequacy of the pricing model. The ratio can provide a measure of the company's financial strength since it measures the margin of profitability built into premium pricing. A company that has a ration in excess of 100% is paying out more claims then it is taking in from premiums. The lower the ratio, the greater the company's financial strength. The ratio is reported both at gross and net of ceding.
INCURRED LOSSES expressed as a percentage of PREMIUMS (which can be related to EARNED or WRITTEN PREMIUMS, depending upon the basis of the contract).