Rate on line

Rate on line, often abbreviated ROL, is the reference price indicator for a non-proportional reinsurance layer. It is calculated by dividing the layer's premium by its limit, that is, by the amount of capacity offered. A rate on line of 20 percent means the cedant pays a premium equal to one fifth of the layer's maximum cover. Its inverse, called the payback period, indicates the number of years of premium needed to repay a full loss, here five years. Rate on line allows the relative cost of covers of different sizes to be compared and price movements on the reinsurance market to be tracked from year to year. It varies according to the layer's position, high on low layers frequently hit, low on high layers rarely reached. Tracking the aggregate rate on line serves as an index of the market's state, its rise signaling a hard market where capacity becomes scarce and dearer, its fall a soft market. It is therefore both a pricing tool at the contract level and a barometer of the underwriting cycle at the market level.

A reinsurer offers a cyber cedant two layers: a low layer of 5 million in excess of 5 million priced at 800,000 euros (rate on line 16 percent, payback six years), and a high layer of 20 million in excess of 10 million priced at 400,000 euros (rate on line 2 percent, payback fifty years). The actuary notes that the market has hardened: last year the low layer traded at 10 percent rate on line; the six-point increase reflects the post-ransomware repricing.

ROL, taux sur ligne, rate-on-line