Insurer Operating Expense Ratios

Insurers' Operating Expenses are the costs for all non-claim activities, including: Commissions, rent, utilities, supplies, legal costs, and employee salaries. Expense Ratios are averages of Operating Expenses, to Earned Premiums (See Equation 4) and vary much less, year to year, or portfolio to portfolio, than PLREs. I assume Expense Ratios are 15% of Earned Premiums, to focus on the impact of PLRE variability on operating results.

$$\textrm{Expense Ratio} = \frac{ \textrm{Operating Expenses}}{ \textrm{Earned Premiums}}$$ (4)