The safety loading of reinsurance premiums

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Abstract
1. Introduction 1.1. In the older forms of reinsurance, often referred to as “proportional” reinsurance, there is no real problem involved in determining the correct safety loading of premiums. It seems natural, in fact almost obvious, that reinsurance should take place on “original terms”, and that any departure from this procedure would need special justification. The only problem which may be troublesome is to determine the three components of the gross premium, i.e. net premium, safety loading and loading for expenses. The last of these components is calculated to cover costs connected with the direct underwriting, such as agent's commission, and does not, in principle concern the reinsurer.