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Experience and Exposure Rating for Property Per Risk Excess of Loss Reinsurance Revisited

Published online by Cambridge University Press:  09 August 2013

S. Desmedt ,
M. Snoussi ,
X. Chenut  and
J. F. Walhin
M. Snoussi
Affiliation:
Secura, Member of the QBE Group, 37 Regentlaan, B-1000, Brussels (Belgium), Université Libre de Bruxelles, Campus de la Plaine CP 210, Boulevard du Triomphe, B-1050, Brussels (Belgium)
X. Chenut
Affiliation:
Secura, Member of the QBE Group, 37 Regentlaan, B-1000, Brussels (Belgium)
J. F. Walhin
Affiliation:
Institut de statistique, biostatistique et sciences actuarielles –Université Catholique de Louvain, 6 Rue des Wallons, B-1348 Louvain-la-Neuve (Belgium), Aon Beni eld, 8-10 Jules Cockstraat, B-1160 Brussels (Belgium)
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Abstract

Experience and exposure rating are traditionally considered to be independent but complementary methods for pricing property per risk excess of loss reinsurance. Strengths and limitations of these techniques are well-known. In practice, both methods often lead to quite different prices. In this paper we show that limitations of traditional experience rating can be overcome by taking into account historical profile information by means of exposure curves. For pricing unused or rarely used capacity, we propose to use exposure rating, calibrated on the experience rate of a working layer. We compare the method presented with more traditional methods based on the information which is generally available to the reinsurer.

Keywords

Experience RatingExposure RatingProperty per Risk Excess of Loss ReinsuranceExposure Curves
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 42 , Issue 1 , May 2012 , pp. 233 - 270
Copyright
Copyright © International Actuarial Association 2012

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