Commonly known as loss rating; losses are trended to ultimate values for a pre-set number of years; units of exposure are trended for those same years and the total ultimate loss is divided by the total number of exposures to create the loss rate per exposure unit; the loss rate is grossed up to include various expense components, e.g., company underwriting expenses, brokerage commissions, loss control expenses, claims handling expenses, taxes, surcharges or assessments.
