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Break Even Loss Ratio Calculator

Work out break even loss ratio instantly with clear inputs, formula shown and shareable results.

About Break Even Loss Ratio Calculator

The break-even loss ratio is what is left of each premium unit after expenses and the target profit margin: 100% − expense ratio − profit target. Losses above it mean the target return is missed and rates need to rise.

Formula

Permissible loss ratio

Break-even LR = 1 - expense ratio - profit target

Worked example

With the default values below, Break Even Loss Ratio Calculator returns Break-Even Loss Ratio of 67.000%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Earned Premiumminimum 0
10,000,000
Expense Ratioaccepts 0–90 %
28 %
Target Profit Marginaccepts 0–50 %
5 %
Current Loss Ratioaccepts 0–200 %
70 %

Results

Break-Even Loss Ratio
67.000%
Headroom Versus Current Loss Ratio
-3.000%
Maximum Allowable Losses
$6,700,000.00
Projected Combined Ratio
98.000%

Step by step

  1. 1Values used
  2. 2Permissible loss ratio
  3. 3Break-Even Loss Ratio= 67.000
  4. 4Headroom Versus Current Loss Ratio= -3.000
  5. 5Maximum Allowable Losses= 6,700,000.00
  6. 6Projected Combined Ratio= 98.000

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

What if the current loss ratio exceeds break-even?

The indicated rate change is roughly current LR divided by break-even LR minus one, before considering trend and competition.

Does investment income change the figure?

Yes. Long-tail lines earn income on reserves, so their permissible loss ratio can exceed the simple expense-based figure.

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