DEFINITION of 'Calendar Year Experience'

Calendar year experience is used in the insurance industry to signify an insurance company's "experience" during a calendar year. It is the difference between the premiums earned and the losses that have been incurred (but are not necessarily occurring) within a 12-month accounting period – regardless of whether the premiums have been received, or the losses have been booked or paid.

BREAKING DOWN 'Calendar Year Experience'

Calendar year experience — also known as underwriting year experience or accident year experience — is the insurance company’s underwriting income, and measures the premiums and losses entered on accounting records during the 12-month calendar. Insurance underwriters insure people and businesses by weighing up the risks and determining the premium to charge to insure that risk. To be profitable, their calendar year experiences need to be greater than 1.

An insurer’s calendar year experience is, therefore, a measure of how well a company underwrites insurance and its ability to evaluate risks. Note that the company may earn a premium or incur a loss at one point in time and receive or payout the cash associated with those events later.

Calendar Year Experience = Accounting Earned Premium / Incurred Losses and Loss Adjustment Expenses for all losses

Incurred Losses = Claims paid out during the year and changes to the loss reserves

RELATED TERMS
  1. Accident Year Experience

    Accident year experience is used to show premiums earned and ...
  2. Policy Year Experience

    Policy year experience describes the relationship between the ...
  3. Calendar Year Accounting Incurred ...

    Calendar year accounting incurred losses is a term used in the ...
  4. Losses Incurred

    Losses incurred refers to benefits paid to policyholders during ...
  5. Valuation Premium

    A valuation premium is rate set by a life insurance company ...
  6. Loss Constant

    Loss constant is an amount added to an insurance policy with ...
Related Articles
  1. Insurance

    How To Easily Understand Your Insurance Contract

    Understanding your insurance contracts can go a long way in making sure that your advisor's recommendations are on track. Learn how to read yours today.
  2. Insurance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  3. Insurance

    How To Value An Insurance Company

    In the insurance space, accurate predictions of metrics such as ROE are important, and paying a low P/B can help put the odds in investors' favor.
  4. Insurance

    Accelerated Underwriting Makes Life Insurance Easy

    A new development called “accelerated underwriting” is making it faster and easier for people to obtain life insurance.
  5. Insurance

    12 Car Insurance Cost-Cutters

    Car insurance rates are on the rise. If car insurance costs are dragging you down, use these tips to free yourself from some of the extra weight.
  6. Investing

    Methods of Handling Risk: A Quick Guide

    Discover the five methods to manage pure risk, and learn how they can be implemented to mitigate risk with health and life insurance.
  7. Insurance

    Insurance: A Common Personal Finance Pitfall

    Making decisions about insurance can be challenging. But declining coverage altogether comes with it's own risks, and costs.
  8. Financial Advisor

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
RELATED FAQS
  1. How do I calculate the combined ratio?

    Learn about the combined ratio and how it is calculated under a financial basis and a trade basis using the loss ratio and ... Read Answer >>
  2. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, investing and claims ... Read Answer >>
  3. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter and the important qualities ... Read Answer >>
  4. What are insurance sector companies usual profit margins?

    Understand what the average profit margin for a company that serves in the insurance sector and what factors can affect the ... Read Answer >>
  5. How much do changes in interest rates affect the profitability of the insurance sector?

    Learn about the relationship between interest rates and insurance company profitability, and how interest rates can affect ... Read Answer >>
Trading Center