Burning ratio generally refers to the same core concept as loss ratio: how much of collected premium is being paid out in losses.
Plain-language meaning
If the ratio is high, the book is paying more in claims than expected for its pricing level. A low ratio usually indicates tighter claims outcomes or conservative pricing.
Difference from combined ratio
Combined ratio adds operating expenses to loss ratio. Burning ratio can be useful at class level, while combined ratio is useful for full financial results.
Why it matters in pricing
Underwriters use the burning ratio when choosing how aggressively to price next terms. It can trigger underwriting tightening, higher deductibles, or reduced limits in deteriorating classes.
Example
An account writes $1 million in earned premium and pays $750,000 in incurred losses. Burning ratio is 75%. If expenses are also high, management may still have margin pressure even with acceptable loss ratio.