Reinsurance Layer Pricing
Excess-of-loss layer expected loss cost, ILFs, and rate-on-line from a fitted severity/frequency model.
Severity & frequency
Layer & premium
Layer expected loss
2,352,357
Rate on line
235.2%
Loss cost % of premium
23.5%
Candidate layers
| Layer | Expected loss | Rate on line | Loss cost % |
|---|---|---|---|
| 250,000 xs 250,000 | 3,344,420 | 1337.8% | 33.4% |
| 500,000 xs 500,000 | 3,141,141 | 628.2% | 31.4% |
| 1,000,000 xs 1,000,000 | 2,352,357 | 235.2% | 23.5% |
| 4,000,000 xs 1,000,000 | 4,008,891 | 100.2% | 40.1% |
| 5,000,000 xs 5,000,000 | 469,789 | 9.4% | 4.7% |
Assumptions & limitations
- Exposure rating relies on the fitted severity curve accurately representing ground-up claims for this class of business and layer.
- Burning cost analysis assumes pasted losses are already at ultimate (fully developed) unless you apply development factors before pasting; only a uniform trend rate is applied here.
- Both methods ignore reinstatement premiums, ALAE loading, and reinsurer expense/profit margins beyond the specified loading %.