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expense ratio

The percentage of premium used to pay all the costs of acquiring, writing, and servicing insurance and reinsurance. There are two methodologies to measure the expense ratio; a trade basis, which is expense divided by written premium and on a statutory basis when the expense is divided by earned premium. Most typically, the ratio is calculated using written premium. Expense ratios are an integral part of retrospective rating basic premiums. See also: combined ratio, earned premium, loss ratio, written premium.


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