The gross premium base on which a non-proportional treaty premium is calculated by applying a rate.
Subject premium is the cedant's gross premium base used to calculate the treaty premium for an excess-of-loss or stop-loss cover. Treaty premium = rate × subject premium. It represents the total underlying exposure covered by the layer, enabling burning cost and rate on line calculations. The precise definition of subject premium is a critical negotiation point: does it include premiums net of brokerage? Taxes? Premiums from all lines or a specific line? A poorly defined subject premium can create ambiguities about the effective scope of the treaty coverage.
Cat XL treaty on household line: subject premium 30 M EUR, rate 1.5‰ → treaty premium = 45,000 EUR. Burning cost = layer losses 450,000 EUR / subject premium 30 M EUR × 1,000 = 15‰.
subject premium, base d'assiette, underlying premium, primes sujettes