An Actuarial Model of Excess of Policy Limits Losses
By Neil M. Bodoff
Excess of policy limits (XPL) losses is a phenomenon that presents challenges for the practicing actuary. This paper proposes using a classic actuarial framework of frequency and severity, modified to address the unique challenge of XPL. The result is an integrated model of XPL losses together with nonXPL losses. A modification of the classic actuarial framework can provide a suitable basis for the modeling of XPL losses and for the pricing of the XPL loss component of reinsurance contracts.
Keywords Excess of policy limits, XPL, ERM, modeling