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Reinsurance Chapter 25

sarah_ said:
What is meant by an Experience refund agreement? When might they be used?
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Hi Sarah

If the actual experience is better than expected (ie claims are lower than in the pricing basis) then the reinsurer may refund part of the premiums to the insurer. It is effectively a type of profit share.

Similarly if the actual experience is better than expected then the insurer may refund part of the premiums to the employer whose employees are being covered.

Experience refunds / profit shares might be used to encourage good experience (eg by enforcing better health and safety at work).

Best wishes

Mark
 
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