Catastrophe load
The part of a risk's price that pays for the catastrophes the portfolio's history does not show, computed from a model rather than from experience.
The catastrophe load is the part of the technical price that covers the expected cost of major natural events. It is computed separately because a portfolio's experience, rich in small claims, is silent or misleading about the large ones: ten years without a major windstorm do not prove the windstorm costs nothing, and a single windstorm year does not tell its frequency. The method therefore separates the two sources. Attritional losses are priced on history, after removing catastrophe losses so as not to count them twice; the catastrophe part is priced on a model's average annual loss, often increased by a margin tied to the risk's contribution to the portfolio's tail. That split explains why the same property can cost very differently depending on its location while its claims history is identical.
A property portfolio collects 50 million euros of premium. Excluding the 2019 windstorm, removed from the history, its attritional loss ratio is 55 percent of premium. The model gives a windstorm average annual loss of 3 million, or 6 percent of premium, raised to 8 percent with the tail margin: it is that load, not the history, that makes the windstorm pay.
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