Total cost of risk
Risk · Cloudbreak team · Updated October 29, 2026 · 6 sources
Definition
Total cost of risk (TCOR) is the sum of an organization's risk-related costs: retained (uninsured) losses and the cost of adjusting them, risk control costs, insurance and other risk transfer costs, and administrative costs.
How it works
TCOR puts every risk-related cost in one number, so the premiums an organization pays sit next to the losses it pays itself. It is usually broken into four parts:
- Risk transfer: insurance premiums and other risk transfer costs.
- Retained losses: uninsured losses and the cost to adjust them, including losses inside deductibles and self-insured retentions.
- Risk control: spending to prevent or reduce losses, such as inspections and safety programs. The University of California, for example, counts its EH&S department budget in its cost of risk.2
- Administration: the cost of running the risk function, such as a risk management department.
The parts trade off against each other. Keeping more risk through higher deductibles or retentions lowers premiums but adds the losses kept, and spending on loss control can lower both. TCOR shows the net effect of those choices, which a premium total alone does not.
Definitions vary, so figures are only comparable when they count the same things. The RIMS Benchmark Survey defines TCOR as the cost of insurance, plus retained losses, plus the administrative costs of the risk management department; risk control is not named. UC's risk office notes there are many ways to calculate cost of risk, and they all give different results.3,4
Example
For example, take an owner of 12 apartment communities that pays $1,800,000 in property and liability premiums, absorbs $420,000 of hail and water losses inside its deductibles, spends $80,000 on roof inspections and other loss control, and spends $150,000 on risk staff and administration. Under IRMI's definition, its TCOR is $2,450,000. On $60,000,000 of revenue, that is $40.83 per $1,000 of revenue.5
- Property and liability premiums$1,800,000
- Losses kept inside deductibles$420,000
- Roof inspections and other loss control$80,000
- Risk staff and administration$150,000
- Total$2,450,000
Where you'll see it
- Risk management reports and budgets, where TCOR tracks whether the whole program costs more or less from year to year.
- The annual RIMS Benchmark Survey, which reports average TCOR per $1,000 of revenue from insurance program data that risk managers and insurance buyers contribute. Property is a large part of the total: property premiums added $3.09 per $1,000 of revenue in 2012, and in 2018 total property costs were the second largest component and rose 5%, even though catastrophe losses fell significantly that year.1,6
- Renewals: in its August 16, 2019 survey release, a RIMS vice president called TCOR benchmarking a valuable tool for senior management and for marketing a risk at renewal time.1
Questions
- How do you calculate total cost of risk?
- Add insurance and other risk transfer costs, retained losses with their adjustment expenses, risk control costs and administrative costs. To compare years or peers, divide by revenue or budget and state it per $1,000, as RIMS does.5,1
- What is the average total cost of risk?
- The 2019 RIMS Benchmark Survey put average TCOR at $9.95 per $1,000 of revenue in 2018, up from $9.75 in 2017. That is just under 1% of revenue.1
- Is total cost of risk the same as insurance cost?
- No. Premiums are one of four parts; retained losses, risk control and administration are the others.
Cloudbreak
Cloudbreak keeps every policy, statement of values and loss run in one place per property, tracks renewals, and watches every building against storms with its proprietary predictive storm engine, built with AI and backed by meteorologists.
Sources
Written by the Cloudbreak team. Numbers, dates and rules cite the published sources below.
- 1. RIMS: 2019 RIMS Benchmark Survey: Now Available
- 2. University of California Office of the President: University of California Cost of Risk (May 23, 2011)
- 3. Risk Management magazine (RIMS): Total Cost of Risk Declines Again
- 4. University of California Office of the President: Office of Risk Services Annual Report FY 2008
- 5. International Risk Management Institute (IRMI): cost of risk (COR)
- 6. RIMS: Total Cost of Risk Jumps 5% in 2012: RIMS Benchmark Survey Now Available