The Kenney Ratio is a rule of thumb developed by Roger Kenney in 1949. Insurance and reinsurance companies use the ratio to gauge the solvency of the company and its ability to pay claims.
The ratio sets a target of net premiums written to policyholder surplus of 2-to-1. An insurance company’s policyholder surplus is the difference between the insurer’s admitted assets and liabilities.
Kenny originally developed separate ratios for fire insurers and casualty insurers. The fire insurers used a 1-to-1 relationship of the unearned premium reserve to surplus, while the casualty insurers used a 2-to-1 relationship between net premium written and policyholder surplus.