Traditional Expense Load

tracyguo8tracyguo8
edited July 2023 in Clark.PropertyCAT

Hi,

In the last section "Reinsurer Expenses", one line states that "Alternately, the traditional loading of 100/80 may be used. This is the same formula but assumes zero fixed expenses and 20% variable expense".

In Clark.CasPerOcc, it states that "The 100/80 means 80c on each dollar is due to actual losses and the rest is expenses. It assumes all expenses are variable. Alternately, the expense ratio is 100/80-1=25%."

May I know which one is correct?

Thanks!

Comments

  • adminadmin

    Thanks, good call out. 100/80 means a 0% fixed expense and 20% variable expense for an expense ratio of 20%. This is equivalent to saying the expense multiplier is 1.25 or the expense load is 25%. We've updated the wiki to reflect this.

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