https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AGross_costDefinition:Gross cost - Revision history2026-05-01T00:08:58ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Gross_cost&diff=18970&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-16T09:42:22Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>💰 '''Gross cost''' in insurance refers to the total cost of [[Definition:Claims | claims]] and related expenses borne by an [[Definition:Insurance carrier | insurer]] before any recoveries — most notably from [[Definition:Reinsurance | reinsurance]], [[Definition:Subrogation | subrogation]], or [[Definition:Salvage | salvage]] — are applied. It represents the full financial impact of [[Definition:Loss | losses]] as they fall on the primary insurer's books, providing a raw measure of exposure that precedes the mitigating effect of risk-transfer arrangements.<br />
<br />
⚙️ When an insurer evaluates the performance of a [[Definition:Book of business | book of business]] or an individual [[Definition:Underwriting year | underwriting year]], gross cost is the starting point. A carrier might record gross [[Definition:Incurred losses | incurred losses]] of a given amount on a [[Definition:Property insurance | property]] portfolio, reflecting paid claims plus [[Definition:Loss reserves | reserves]] for reported and [[Definition:Incurred but not reported (IBNR) | IBNR]] claims. The net cost — what the insurer actually retains after [[Definition:Ceded reinsurance | ceding]] a portion to reinsurers or receiving subrogation recoveries — can be substantially lower, but the gross figure is essential for understanding the true scale of the risk being underwritten. In financial reporting, both [[Definition:IFRS 17 | IFRS 17]] and [[Definition:US GAAP | US GAAP]] require insurers to present gross and net figures, giving analysts and regulators transparency into the degree of reliance on reinsurance.<br />
<br />
💡 Distinguishing gross cost from [[Definition:Net cost | net cost]] matters enormously for several audiences. [[Definition:Rating agency | Rating agencies]] and regulators examine the ratio of [[Definition:Ceded premium | ceded premium]] to gross premium — and correspondingly, the gap between gross and net losses — as an indicator of how dependent a carrier is on its reinsurers' creditworthiness. A wide spread suggests heavy reliance on [[Definition:Reinsurance recoverables | reinsurance recoverables]], which introduces [[Definition:Credit risk | counterparty credit risk]]. For [[Definition:Managing general agent (MGA) | MGAs]] operating under [[Definition:Delegated underwriting authority (DUA) | delegated authority]], gross cost metrics are critical in demonstrating portfolio quality to capacity providers, since the MGA's performance is typically judged on gross results before the carrier applies its own reinsurance programme. Across all markets, keeping a clear eye on gross cost prevents the dangerous illusion that reinsurance alone can mask deteriorating [[Definition:Underwriting | underwriting]] fundamentals.<br />
<br />
'''Related concepts:'''<br />
{{Div col|colwidth=20em}}<br />
* [[Definition:Net cost]]<br />
* [[Definition:Reinsurance]]<br />
* [[Definition:Incurred losses]]<br />
* [[Definition:Loss reserves]]<br />
* [[Definition:Subrogation]]<br />
* [[Definition:Gross written premium (GWP)]]<br />
{{Div col end}}</div>PlumBot