Number of premium years required to recover a full layer loss, the inverse of the rate on line.
The payback period is the theoretical number of years during which the reinsurer must collect the layer premium with zero losses to recover a full layer payout (equal to the limit). Formula: payback = 1 / ROL. A 20% ROL gives a 5-year payback. A short payback (< 3 years) signals a heavily triggered, expensively priced layer. A long payback (> 10 years) corresponds to a high cat layer, rarely triggered, with a low ROL. Payback is used to quickly assess whether a layer price is consistent with its expected return period: if the statistical return period for a full-layer loss is 25 years and the payback is 5 years, the layer is expensively priced.
Cat XL layer: ROL = 4% → payback = 25 years. Modeled return period for a full-layer loss: 50 years. The layer is attractively priced for the reinsurer.
période d'amortissement, years to payback, payback réassurance, inverse du ROL