Hi all,
Say we have 2 XoL RI contracts:
1) A 1m xs 2m contract with no deductibles
2) A 1m xs 1m contract with a 1m aggregate deductible
Which contract, all else being equal, would have a higher premium charged by the reinsurer?
I guess if there were 3 claims of £1.5m, then 1) would never provide recoveries but 2) would recover 500k on claim 3 once claims 1 and 2 have burnt through the deductible, so 2) is more expensive, but just want to check this as i get confused when aggregate deductibles are applied to 'individual' XoL contracts (I associate individual XoL with individual losses so don't like the idea of aggregations here!). Thanks for the help
Say we have 2 XoL RI contracts:
1) A 1m xs 2m contract with no deductibles
2) A 1m xs 1m contract with a 1m aggregate deductible
Which contract, all else being equal, would have a higher premium charged by the reinsurer?
I guess if there were 3 claims of £1.5m, then 1) would never provide recoveries but 2) would recover 500k on claim 3 once claims 1 and 2 have burnt through the deductible, so 2) is more expensive, but just want to check this as i get confused when aggregate deductibles are applied to 'individual' XoL contracts (I associate individual XoL with individual losses so don't like the idea of aggregations here!). Thanks for the help