Estimating Probable Maximum Loss with Order Statistics [Author’s Reply]

My paper was originally written for the May, 1982, Casualty Actuarial Society Discussion Paper Program “Pricing, Underwriting and Managing the Large Risk.” Mr. Beer reviewed my paper at that time. His discussion so enhanced my paper that I made my submission to the Proceedings conditional on his agreement to submit his discussion. Mr. Beer’s definitions of PML, and PMAL, easily clarify an area I treated by implication, but did not address directly. These definitions explain how the risk manager and the underwriter can have different PML’s when they use the same loss distribution; the different PML’s are due to different values.