Hi, Whilst learning acronyms I’ve come across a couple of things that I don’t really understand, and wondered if someone could explain them to me in a more simplified way: Stop loss - what does ‘amount of recoverable later returned by cedant’ mean? Risk loading - what does ‘the marginal impact on capital of writing a risk and load for the required rate of return on the additional capital required to write that risk’ mean? Any help greatly appreciated, don’t want to be writing things I don’t understand. Thanks!
Apologies there was a typo in my original post, it should read: Stop loss - ‘amount of recoverable layer returned by cedant’. This is one of the important considerations when pricing stop loss on p963 of the ebook. Risk loading - one of the bullet points on p939 of the ebook.
stop loss - they're talking about a participation clause / deductible. see p265 of e-book, penultimate bullet. risk loading - it's saying that you quantify the extra capital needed when you sell a policy, and then your risk load will reflect the extra return required on that extra capital.
