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 Taylor Watts, Broker · New Business · Last reviewed
Reinsurance pricing is the actuarial and underwriting discipline of setting the premium for a reinsurance contract — proportional or non-proportional, treaty or facultative — based on the expected losses, structural features and market context.
Generic approach
Indicated premium = Expected losses + Risk margin + Brokerage and frictional costs + Cost of capital + Profit loading
The expected loss component dominates in working layers; the cost of capital and profit loading dominate in catastrophe layers where expected loss is small.
Methods
Burning cost — historical losses to the layer divided by exposure (working layers, credible experience).
Exposure rating — applied to the ceded exposure using industry-derived size-of-loss curves (cat layers, new lines, low credibility).
Frequency-severity simulation — Monte Carlo of claim count and size combined (large account, complex programmes).
Catastrophe model — vendor cat model output (property cat, marine cat, terror).
Experience credibility — blend of burning cost and exposure rating.
Layered pricing
For a multi-layer programme:
Working layer (e.g. £1m xs £5m) — burning cost dominant; profitable for both sides.
Top layer (e.g. £50m xs £50m) — exposure rate dominant; cat model output for nat-cat layers.
Reinstatements
Most non-proportional layers permit reinstatement of cover after a loss, against a paid premium (“reinstatement premium”). The number of reinstatements, the cost, and any aggregate limit materially affect the layer’s cost-of-capital loading.
References
Swiss Re. Pricing methods in non-proportional reinsurance.
Our service promise. We acknowledge every quote request the same working day. For straightforward risks, indicative terms typically follow within five working days. Complex risks — higher-risk buildings, cladding, mid-term proposals requiring fresh underwriting — may take longer; we’ll send you a progress note by the end of the fifth working day in those cases.