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Pricing stop loss reinsurance

T

thistleandspice

Member
Here's another one...

The core reading says that "a stop loss contract is priced using similar methods for other XoL reinsurance, but where the excess point and limit can be expressed as a loss ratio rather than a monetary amount...A view of the loss ratio can be derived from historical experience, suitably adjusted, in a similar way to that described for QS/Surplus."

ie. to get the loss ratio, use triangulation methods, develop to ult, and then find distribution of as-if LR's.

That's all fine...

But how do we then go from having a LR distribution, to getting the premium for the contract? Don't really see where the notes make this connection.

Thank you!

thistle
 
I am guessing we simulate how often the gross loss ratio exceeds the attach, and the expected loss exceeding the attach each time. Then you have the mean and variance. Your premium is fixed, so you can calc the expected loss using the loss ratios.
 
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