London Market Methods Introduction

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This section discusses the main methods used for pricing London Market business.

The characteristics of London Market business are very different from personal lines, which means that different emphases and analyses are necessary when pricing business. These characteristics include:

  • data volumes are generally small and sparse, and often not readily available
  • coverages are often not very homogeneous between different risks and between the same risk in different years
  • there is much more variability within the risks compared to personal lines insurance.

Topics covered in this section include the following:

  • overview: experience rating and exposure rating
  • estimating the loss cost
  • pricing excess of loss
  • stochastic and other methods
  • exposure measures
  • data issues
  • Increased Limit Factors
  • attachment of cover
  • contract structure
  • other contract complications
  • large claims and latent claims
  • other pricing factors
  • catastrophe models in pricing
  • developing models for underwriters
  • rate monitoring.

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