Incorporating a Primary Insurer’s Risk Load into the Property Rate

There have been numerous articles giving guidance on how to include the cost of reinsurance in rate indications. What has been missing from the discussion is a method to account for the risk assumed by the primary insurer at the higher layers of the reinsurance program. This note provides such a method, using information from a catastrophe model and a company’s reinsurance program.

Keywords: Large loss and extreme event loading, traditional risk load (profit margin)