Reinsurance Pricing Working Party report

Document description

The 1998 Reinsurance Pricing working party produced a paper which covered some of the actuarial and other issues encountered in arriving at a risk premium. A workshop was held at the conference which provided a detailed worked numerical example. This year's working party has attempted to build on this work by describing typical pitfalls which may confront the pricing actuary and some potential solutions. Some numerical examples are included. It should be noted that the list of pitfalls is not intended to be exhaustive. The paper is divided into a number of sections. A basic overview of the pricing process is followed by a commentary on each of the potential pitfalls faced as follows:- (a) Overview of the pricing process\; (b) Typical pitfalls:- (i) need to provide all losses that have ever been above data limit\; (ii) developing individual claims\; (iii) underlying policy limits\; (iv) benchmarks for higher layers\; (v) extreme values\; (vi) pricing aggregate features\; (vii) using the wrong aggregate claims distribution. (c) Appendix.