How does reinsurance pricing work?

Reinsurance pricing is two jobs that get flattened into one slide. Technical price is an actuarial construct assembled from cited inputs. Quoted price is a market decision. Mixing them is how a model output becomes a binder without anyone noticing the attachment was never on the page.

Software can assemble the inputs. A human sets technical price. A human, usually a different human, sets the quote. A rate without a cited attachment, limit, hours clause, or exposure basis is not a price. It is a completion.

How it works

Treaty pricing consumes documents. Subject premium by year. Loss history with large losses identified and an as-at date. Exposure and sums insured. Development for long-tail. Catastrophe model narratives if the class needs them, as files, not as pasted paragraphs. Current structure: attachment, limit, reinstatement, hours, event definition — cited from the wording you intend to bind, which may not be last year's.

Facultative pricing adds the pack. Named insured, occupancy, construction, territory, limit, deductible, TIV with sources, loss run with as-at. If a field has no span, it is not an input. It is a chase item. Burning cost that uses an undated run is a rumour plus whatever happened since.

Common language still needs a source. Rate on line is premium divided by limit, on the limit you can cite. Loss ratio is losses divided by premium, on the as-at and the basis you can cite. Burning cost is historical losses over exposure, not a vibe about a bad year. None of those metrics forgive a TIV conflict or a missing hours clause.

Worked example

ACME Construction Ltd, acme.example, property facultative. Period 1 January 2026 to 31 December 2026. Occurrence limit USD 10,000,000 on slip page 2. Slip TIV USD 42,000,000. SOV TIV USD 47,100,000. Hours clause absent. SOV as-at absent.

A technical view that needs TIV cannot pick USD 44,550,000. That figure is in neither file. A rate on line on USD 10,000,000 still needs to know whether the warehouse is in, because accumulation and expected loss both move if it is. A hours-clause gap blocks a period-of-indemnity view on a construction occupancy. The honest pricing pack shows the conflict and the gaps. The quote, if any, is a human decision after those items are named.

What goes wrong

Last year's structure is reused because this year's wording was not extracted. Loss-free years with no as-at are treated as evidence. Catastrophe output is pasted without the file. Facultative quotes go out on the covering-email TIV. Treaty indications use a bordereau total that does not match the sheet. The pricing memo becomes the system of record. It should not.

Related reading

Treaty prep sits on treaty reinsurance. The facultative pack list is how to build a facultative submission pack. Honest fields are source-grounded extraction.