On the Use of Synthetic Risks in Determining Pure Premium Excess Ratios for Large Compensation and Liability Risks

The pure premium ratio which denotes the ratio of the aggregate of risks' losses in excess of a specified loss ratio to the total aggregate losses depends upon the size of the risks considered. There is a dearth of material in the larger premium sizes for determining such pure premium ratios. The premium volume may be large when viewed as an aggregate but the data are rather limited when viewed as to the number of units--the individual risks--involved. This is not strange, for risks falling into the higher premium size groups do not exist in large numbers. Even if the experience of every risk of larger size could be secured there still would be a scarcity of material. This scarcity suggests recourse to other possible sources of material.