What is Combined Ratio? Insurance Underwriting Profitability
The Answer
The Combined Ratio measures the operational profitability of an insurance company by summing its loss ratio (claims paid) and expense ratio (operating costs). A combined ratio below 100% indicates profitable underwriting.
Why it Matters
If combined ratio > 100%, the insurer is losing money on underwriting and relying entirely on investment returns to survive. Highly vulnerable to macro downturns.
Sentinel Insight
āAvoid insurers who consistently report combined ratios above 105%. They are pricing risk inefficiently and are exposed to claims shocks.ā
š How to Interpret
In Risk Context
Flagium monitors Combined Ratio. A combined ratio persistently above 100% triggers a Competitive Position alert.
Deep Dive
Combined Ratio: Measuring Underwriting Performance
In insurance, profitability comes from two sources: underwriting operations and investment income. The Combined Ratio is the primary measure of underwriting health.
The Combined Ratio Formula
A combined ratio of 95% means the insurer pays out ā¹95 in claims and expenses for every ā¹100 collected in premiums, leaving a ā¹5 underwriting profit. If the ratio is 105%, the insurer loses ā¹5 on every policy and must cover it with investment returns on float.
Detect risk early
Flagium tracks these signals across multiple quarters to help you avoid structurally weak companies before it reflects in price.
Check Insurance Combined Ratios āšš Related Topics
Flagium Risk Brief ā every Saturday
š¬ Flagium Risk Brief ā 3 forensic anomalies investigated weekly
See a sample issue ā