Underwriting Risk Calculator
Calculate underwriting risk, expected losses, risk-adjusted premiums, and capital requirements for insurance policies.
Inputs
$
$
$
$
Results
Expected Loss
$1,000.00
≈ 8 pairs of sneakers
Underwriting Profit
$9,000.00
≈ 9 smartphones
Profit Margin
90%
Risk Score
2 / 100
Risk-Adjusted Premium$10,000.00
Capital Requirement$50,000.00
How to Use This Calculator
- Enter the portfolio's expected loss ratio.
- Input the volatility (coefficient of variation) of the loss ratio.
- Set the confidence level for capital assessment.
- Review the risk-based capital requirement at the selected confidence level.
- Use the output to evaluate whether the portfolio's premium supports the underwriting risk.
How the result changes with Probability of Claim
| Probability of Claim | Expected Loss | Underwriting Profit | Profit Margin |
|---|---|---|---|
| 0.8% | $400.00 | $9,600.00 | 96% |
| 2.8% | $1,400.00 | $8,600.00 | 86% |
| 5.2% | $2,600.00 | $7,400.00 | 74% |
| 7.2% | $3,600.00 | $6,400.00 | 64% |
What each input means
- Policy Value
- Total policy coverage amount
- Annual Premium
- Annual premium charged
- Probability of Claim
- Probability of claim occurring
- Expected Claim Amount
- Average expected claim amount
- Worst Case Claim
- Maximum possible claim amount
- Reinsurance Coverage
- Percentage covered by reinsurance
How this is calculated
Formula
Expected Loss = Probability × Claim AmountWorked example, using the default values
- Identify Input Parameters4 parametersPolicy Value = 500000, Annual Premium = 10000, Probability of Claim = 2, Expected Claim Amount = 50000 = 6 input(s) provided
- Calculate Expected LossExpected Loss1000 = $1,000
- Calculate Underwriting ProfitUnderwriting Profit9000 = $9,000
- Calculate Profit MarginProfit Margin90 = 90%
- Calculate Risk-Adjusted PremiumRisk-Adjusted Premium10000 = $10,000
- Calculate Capital RequirementCapital Requirement50000 = $50,000
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