Reinsurance Mathematics

Proportional and non-proportional reinsurance, excess of loss, and stop-loss pricing.

Key Concepts

• •Proportional reinsurance: quota share and surplus share arrangements
• •Non-proportional reinsurance: excess of loss (per risk, per occurrence, aggregate)
• •Stop-loss reinsurance: aggregate excess of loss coverage
• •Layer pricing: expected losses, load factors, and attachment points
• •Burning cost method: using historical experience to price reinsurance layers
• •Exposure rating: using ILFs and loss distributions for catastrophe layers
• •Experience rating for reinsurance: credibility and loss development
• •Catastrophe modeling: return periods, AAL, and PML
• •Reinsurance program optimization: balancing cost and risk transfer
• •Financial reinsurance: finite risk and retroactive covers

Study Tips

• 1.Understand the difference between proportional and non-proportional structures.
• 2.Practice layer pricing problems with different attachment points and limits.
• 3.Work through burning cost calculations with loss development and trending.
• 4.Learn how catastrophe models produce loss distributions for reinsurance pricing.
• 5.Understand the regulatory treatment of different reinsurance structures.

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