[L087]

loss cost

1) The ratio of actual (or "as if") reinsured losses to a ceding company's subject matter premium (either written or earned premium) for the same period. Used to analyze past experience and to predict future experience of a per-risk excess cover.

2) In order to reduce the allegations of rate-fixing and prevent antitrust suits and litigation, many rating bureaus and rate organizations have now eliminated the development of rates. Instead, they are providing only base statistics called a loss cost, which is the percent of each exposure base for each classification that is directly attributed to the amount of loss experienced by that class. To the loss cost, each insurer must then add its own loading for expense, contingencies, profit, etc.