Allocating Premium to Layer By the Use of Increased Limits Tables [Discussion]

Mr. Ferguson has written an excellent discourse on the use of increased limits factors as a method of excess of loss ratemaking for private passenger automobile bodily injury liability. It must be remembered, as is pointed out, in the paper, that this method produces a gross premium which has to be modified to leave the reinsurer with the pure premium plus a .margin for profit and contingencies plus a pro-rata portion of the loss adjustment expense for those claims paid by the reinsurer. This modification is accomplished by the use of a commission on the gross increased limits premium.