When we calculate "cost of risk" we use the following formula:
1. Premiums Paid +
2. Uninsured Losses (deductibles, retentions, and/or uninsured losses) +
3. Outside Services (broker fees, loss control, inspection fees, etc.) +
4. Administration (cost of administrating your program - oftentimes we use the annual budget figure for the risk management department) =
5. Cost of Risk
This gives us a starting point and you can use this formula to track performance over time.
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