Pricing of Excess Liability for Municipalities: A Case Study

Pricing a new product line with limited data poses a major challenge to the actuary. Standard actuarial methods require a quantity and consistency of data that may not be available. Therefore, unique solutions may be required. This does not mean that the actuary must develop an entire new methodology. Instead it is often possible to use a combination of techniques found in actuarial literature in reaching a solution. The application of these techniques may require the use of equal portions of actuarial art and science. This paper relates the method used to develop a pricing framework for a new excess liability insurer. A standard pure loss rate technique was used along with a "curvefitting" approach. The paper highlights how the limitations imposed by the availability of data were addressed. Reinsurance Research - Pricing/Contract Design