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Rate on Line

Trading Term

Rate on line is the premium paid for a reinsurance layer divided by the limit of coverage in that layer, expressed as a percentage. A layer with a 20% rate on line costs $20 for every $100 of coverage, which implies a payback period of five years if the layer were to be fully exhausted once every five years. Comparing the rate on line against the modeled expected loss cost of the same layer gives a rough sense of the margin embedded in the price, and that gap is the basis for comparing reinsurance with alternative sources of protection.

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