Skip to main content
Calcimator

Risk Load Calculator

Calculate actuarial risk loads and margin for adverse deviation based on loss volatility and confidence levels.

Inputs

$
$

Results

Risk Load

$3,290,000.00

≈ 8 average U.S. homes

Capital Required

$3,553,200.00

≈ 8 average U.S. homes

Total Risk Charge$8,290,000.00
Risk-Adjusted Premium$8,290,000.00
Return on Capital (%)7.41%
How to Use This Calculator
  1. Enter the expected loss for the risk being priced.
  2. Input the standard deviation of the loss distribution.
  3. Select a confidence level (90%, 95%, 97.5%, or 99%) representing the probability that reserves will be adequate.
  4. Set the cost of capital and risk-free rate to reflect current required returns.
  5. Review the risk load, capital required, total risk charge, and risk-adjusted premium, along with the resulting return on capital.

How the result changes with Standard Deviation

Standard DeviationRisk LoadCapital Required
$1,000,000,000.00$1,645,000,000.00$1,776,600,000.00
$3,500,000,000.00$5,757,500,000.00$6,218,100,000.00
$6,500,000,000.00$10,692,500,000.00$11,547,900,000.00
$9,000,000,000.00$14,805,000,000.00$15,989,400,000.00

What each input means

Expected Loss
Expected (mean) loss for the portfolio or line of business
Standard Deviation
Standard deviation of the loss distribution
Confidence Level (%)
Probability that reserves will be adequate
Cost of Capital (%)
Required return on capital (cost of equity)
Risk-Free Rate (%)
Current risk-free interest rate (e.g., treasury yield)

How this is calculated

Worked example, using the default values

  1. Identify Input Parameters
    4 parameters
    Expected Loss = 5000000, Standard Deviation = 2000000, Confidence Level (%) = 95, Cost of Capital (%) = 12 = 5 input(s) provided
  2. Calculate Risk Load
    Risk Load
    3290000 = $3,290,000
  3. Calculate Capital Required
    Capital Required
    3553200 = $3,553,200
  4. Calculate Total Risk Charge
    Total Risk Charge
    8290000 = $8,290,000
  5. Calculate Risk-Adjusted Premium
    Risk-Adjusted Premium
    8290000 = $8,290,000

Engine last updated . Checked against 2 independently-derived tests — how we verify calculators.

Related Calculators

The questions that sit next to this one — chosen by subject, including calculators filed under a different category.

Actuarial Science

Credibility Calculator

Calculate Limited Fluctuation and Bühlmann credibility factors for actuarial ratemaking and reserving.

Actuarial Science

Catastrophe Model Loss Calculator

Estimate catastrophe losses including expected annual loss, probable maximum loss, and exceedance probabilities.

Mental Health

ACE Score Calculator

Calculate the Adverse Childhood Experiences (ACE) score from 10 categories of childhood trauma to assess long-term health risk.

Actuarial Science

Life Expectancy Calculator

Calculate life expectancy based on age, gender, lifestyle factors, and health metrics. Uses actuarial science principles.

More in Insurance.