A Simple Tool for Pricing Loss Sensitive Features of Reinsurance Treaties

Proportional reinsurance treaties may contain a number of loss sensitive features which require pricing by the reinsurance actuary. This paper extends the ideas presented in Bear and Nemlick’s paper Pricing the Impact of Adjustable Features and Loss Sharing Provisions of Reinsurance Treaties (PCAS 1990, Volume LXXVII) to address this problem. An aggregate distribution is introduced which can be written in closed form for quick calculations. The model could be adapted for use in aggregate applications outside of reinsurance.