Reinsurance work: translate the contract into the model first
Before fitting a loss distribution, establish what the contract pays. “Reinsurance” can mean a proportional share, a per-risk excess layer, an occurrence layer or aggregate protection. Those structures do not respond to the same loss measure.
Original layer example
A 1m excess of 1m per-loss layer attaches after the first 1m and pays up to another 1m. For a covered 3m loss, recovery is min(max(3m − 1m, 0), 1m) = 1m. The cedant retains 2m, assuming no other covers, exclusions or relevant limits.
An occurrence treaty would require aggregation according to its wording before applying the layer. Reinstatement premiums and aggregate limits can change the economic result.
What the analyst actually checks
Build gross-to-ceded-to-net reconciliations, validate attachment and exhaustion logic, and test a handful of hand-calculated losses. Examine whether cedant data are ground-up, limited or already net of another cover. Trend and development assumptions must match the basis used in the model.
A reinsurer prices risk accepted from cedants and monitors accumulation. A cedant analyses purchase options, retained volatility, cost and counterparty exposure. These are related but different assignments.
Annual treaty renewals create deadlines. New cover design, catastrophe model changes and portfolio optimisation are project work; recovery tracking and data reconciliation also recur.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.