Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
~2 min read
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Category: Pricing & rating · Reviewed by Taylor Watts, Broker · New Business · Last reviewed
Retrospective rating (also “retro” plans, “swing plans”) sets the final premium for a policy period based on the actual losses incurred during that period, subject to defined minimum and maximum premium parameters. It transfers a substantial portion of the underwriting risk back to the insured in exchange for premium efficiency.
Formula
Final premium = (Basic premium + Converted losses × Loss conversion factor) × Tax multiplier
bounded between agreed Minimum and Maximum premiums.
Components
Basic premium — insurer’s expense and net cost of insurance regardless of losses.
Converted losses — actual losses × loss limit factor (capping individual large losses).
Loss conversion factor — multiplier for unallocated loss adjustment expense (ULAE).
Tax multiplier — for premium-based taxes.
Min/Max premium — the swing limits.
Use cases
US workers’ compensation for very large employers.
Large commercial general liability programmes.
Captive-fronted programmes where the captive assumes the variable portion.
Long-term programmes for clients with predictable, controllable exposures.
UK relevance
Retro plans in the strict US-styled sense are rare in the UK market. Their economic equivalent — premium-sharing, loss-sharing or profit-commission features — appears in:
Aggregate stop-loss programmes.
Captive fronting arrangements.
Long-term agreements (LTAs) with profit commission clauses.
Self-insured retentions with paid-loss conversion.
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.