Why it is used
It is one input for experience-based pricing and programme evaluation.
Reinsurance Intelligence · Pricing
All conceptsBurning Cost
Burning cost compares historical reinsured losses with the relevant subject premium over the same exposure period.
Illustrative example
Five years of adjusted layer losses are divided by five years of adjusted subject premium before expense and risk loads.
Programme questions
- Loss development and inflation
- Exposure and portfolio changes
- Catastrophe loading and future uncertainty
Educational overview only. Reinsurance effect depends on the complete contract, programme structure, accounting basis, law, facts, and counterparties. The original insurer normally remains responsible to its policyholder.