Abstract
The derivation of an appropriate price for a reinsurance contract is a formidable problem. This is due in large part to the difficulties encountered in estimating the probability distribution for underlying loss payment. For example, facultative reinsurance contracts on individual direct policies usually apply to the large or catastrophic losses described in the right-hand tail of the loss distribution. But the infrequency of these large losses implies that the tail of the loss distribution is extremely difficult to estimate.1 Similar estimation problems arise with treaty reinsurance, especially when it is arranged on a nonproportional basis. Despite these problems, some estimate of the loss distribution (or at least of summary characteristics of the distribution) is essential to the derivation of the reinsurance premium. This is true no matter what technique is used to derive an appropriate premium for the reinsurance contract.
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© 1988 Springer Science+Business Media New York
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Doherty, N.A. (1988). The Pricing of Reinsurance Contracts. In: Borba, P.S., Appel, D. (eds) Workers’ Compensation Insurance Pricing. Huebner International Series on Risk, Insurance, and Economic Security, vol 7. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7789-2_9
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DOI: https://doi.org/10.1007/978-94-015-7789-2_9
Publisher Name: Springer, Dordrecht
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