Nonproportional Reinsurance and the Index Clause, [Discussion]

Mr. Ferguson's paper is certainly timely as inflation and its effects have assumed a new prominence in our midst. It has long been recognized, in literature as well as in practice, that proper accounting for inflationary trends is a necessity in maintaining the actuarial balance of the primary insurer's rate levels. This has also been reorganized by the excess writer. Fixed retentions, however, have magnified the effects of inflation on the excess writer. This paper graphically demonstrates the magnification process.