An Application of Game Theory: Property Catastrophe Risk Load

Two well known methods for calculating risk load - Marginal Surplus and Marginal Variance - are applied to output from catastrophe modeling software. Risk loads for these marginal methods are calculated for sample new and renewal pricing are examined. For new situations, both current methods allocate the full marginal impact of the addition of a new account to that new account. For renewal situations, a new concept is introduced which we call "renewal additivity."