Combined ratio is the sum of loss ratio and expense ratio. An insurer with a ratio under 100% is writing at an underwriting profit; over 100% means underwriting loss before investment income.
Why insurers monitor it
It tracks whether premium collected covers claims, commissions, and operating costs. It is a core metric in financial reporting and pricing decisions.
Impact on pricing and capital
Consistently high combined ratios often lead to premium increases, underwriting tightening, or reduced market expansion. Lower ratios create room for competitive pricing and stronger retention.