REINSURANCE PRICING · T456 cat-30

Reinsurance Burning Cost & XL Layer Pricer

Price an excess-of-loss (XL) reinsurance layer using the burning cost method: the standard starting technique in CAS reinsurance actuarial practice. Enter historical loss experience and the layer structure; the tool trends losses to the prospective period, applies an IBNR load, computes the as-if per-occurrence layer loss for each year, and returns the burning cost rate, technical rate, technical premium, reinstatement cost, and a 5×5 attachment×limit sensitivity grid.

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💻Client-side
📋CAS Reinsurance Pricing
Burning Cost Excess of Loss Technical Premium As-If Layer Loss Reinstatement CAS Ratemaking Treaty Pricing
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A: Layer Structure
Layer begins here (excess of this amount)
Maximum recovery per occurrence (xs attachment)
Per-occurrence XL
Aggregate XL
Per-occurrence applies the layer to each year's largest implied event; aggregate cumulates losses first.
Reinstatement Terms
Default 1
% of base premium per reinstatement
Layer premium used for reinstatement cost
B: Historical Loss Data (up to 15 years)
Accident year Subject earned premium ($) Gross losses ($) # Claims (opt.)
C: Adjustments
Severity trend: default 4.5%
Experience midpoint → prospective midpoint
Uplift on reported losses for IBNR
Multiplier for change in insured values / headcount
Default 70%: technical premium derivation
Forward subject premium for technical premium
D: Year-by-Year Experience
E: Summary KPIs
F: Technical Rate Sensitivity (Attachment × Limit, ±20%)

Technical rate (burning cost ÷ target loss ratio) recomputed across a 5×5 grid of attachment points (rows) and limits (columns), each stepped ±20% from your selected values. The highlighted centre cell is your base selection.

G: Caveats & Method Limitations
About This Tool
Disclaimer Starting-point reference calculation only. The burning cost method relies on historical experience and a flat IBNR load; it does not incorporate exposure rating, frequency/severity curve fitting, or stochastic credibility. Not a substitute for actuarial sign-off. Professional actuarial review is required for any treaty pricing decision.
CAS: Basics of Reinsurance Pricing The burning cost (experience rating) method: trend ground-up losses to the prospective period, apply as-if to the layer, and divide total layer losses by subject premium. CAS Study Note
Experience vs. Exposure Rating For high, thin, or sparsely-hit layers, experience (burning cost) is supplemented or replaced by exposure rating using increased-limits factor curves. CAS Reinsurance Pricing
As-If / Per-Occurrence Layer Loss Layer loss = min(max(developed loss − attachment, 0), limit), applied per occurrence (or to the cumulated annual total for aggregate XL). XL Layer Mechanics
Reinstatement Premium Reinstatement cost = (recovery ÷ limit) × reinstatement premium % × base premium, summed across the available reinstatements. Treaty Wording Convention
Method Parameters
DEFAULTS
Loss trend factor4.5% p.a.
Target loss ratio70%
Reinstatements1 @ 100%
CREDIBILITY FLAGS
Min years5
Min non-zero layer losses5
FORMULA
Trended = Loss × (1+t)^n
Developed = Trended × (1+IBNR)
LayerLoss = min(max(Dev−A,0),L)
BC rate = ΣLayer ÷ ΣPremium
Tech rate = BC ÷ TargetLR