Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
~2 min read
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Category: Reinsurance pricing · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed
In short:Exposure rating is a reinsurance pricing technique that estimates the loss cost to a layer from the shape of the exposure rather than from the cedent’s loss history. It is essential for higher layers where historical losses are too sparse to be credibly used.
Method
Characterise the exposure — schedule of insured locations / risks with sums insured, occupancy, construction, geography.
Identify or estimate the size-of-loss curve — the proportion of ground-up loss expected to fall in any layer, by occupancy and TIV band. Standard industry curves include Lloyd’s curves, Ludwig curves, MBBEFD (Bernegger), Salzmann, Riebesell.
Apply curves to each exposure band — compute the expected loss cost to the layer for each band.
Sum across bands — total expected loss to the layer.
Load for risk margin, brokerage, capital, profit.
Curves
Lloyd’s curves — historical curve set used in Lloyd’s facultative property pricing.
Bernegger MBBEFD — modified Bernegger, Burnecki, Esscher, Furrer, Drepper curve family commonly used by reinsurers.
Salzmann tables — earlier 1960s US tables for fire risks.
Industry occupancy curves — provided by Swiss Re and other reinsurers.
Combining with experience
For mid-layers, exposure rating and burning cost are commonly credibility-weighted:
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