Retention Ratio

It is expressed as a percentage, roughly measuring how much risk is being carried by an insurer rather than being passed to reinsurers. What it measures directly is how much of the premium is retained rather than passed on and its use as a measure of risk carried assumes that premium is proportional to risk. This is a reasonable assumption, but not exact. Insurers and re-insurers have different costs, apart from covering risk, that need to be covered by premiums. In addition, two different businesses need to have the same margin.

Calculated as: Net premium written ÷ Gross premium written x 100