Index Clause for Aggregate Deductibles and Limits in Non-Proportional Reinsurance

Index clauses currently in place in the market do not specify how Annual Aggregate Deductibles (AAD) and Annual Aggregate Limits (AAL) should be indexed, which result in inconsistency when indexed deductibles and limits are in place.
In this paper, concepts of indexed deductible and limit will be revisited for developing indexing methods for AAD and AAL. Formal mathematical proofs and numerical examples will be presented.
The introduced AAL indexing methods enable determination of paid reinstatement premium when index clause for per-claim deductible and limit is in place.
The choice of appropriate method for indexing AAD and AAL shall take into account both theoretical and practical soundness.

Keywords. Reinsurance; Excess (Non-Proportional); Deductibles, Retentions and Limits.