Underwriting Expense Ratio Law and Legal Definition
The underwriting expense ratio is the proportion of direct and ceding commission expenses and other underwriting expenses less policy billing fees and other administration revenue to premiums earned. On the other hand it is the percentage of a company's net premiums written that went toward underwriting expenses, such as commissions to agents and brokers, state and municipal taxes, salaries, employee benefits and other operating costs. The ratio is computed by dividing underwriting expenses by net premiums written. The underwriting expense ratio is a measure to a company’s operational efficiency in producing, underwriting and administering its insurance business. Generally, underwriting expense ratios are calculated on a gross basis due to the high level of reinsurance.