Question 1

An account has thirty years of stable, credible loss history on a working layer. Which rating method should dominate the price?

Accepted Answer

Experience rating, because the account’s own history is credible enough to trust — High credibility means the account’s own claims record is statistically reliable, so experience rating carries most of the weight in the blend.

Question 2

Why is a high catastrophe layer almost always priced primarily by exposure rating rather than experience?

Accepted Answer

A handful of loss-free years in that layer does not mean the true expected loss is zero — the account lacks enough history at that height to be credible — High layers are hit rarely by nature. Zero recorded losses reflects thin data, not zero expected loss — exactly the situation exposure rating is built for.

Experience vs. Exposure Rating

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