Severity

Severity is the average unit cost of a claim, obtained by dividing total incurred losses by claim count. Together with frequency it forms the two fundamental risk components: pure premium = frequency × severity. Severity is particularly exposed to inflation (materials, labor, medical costs) and extreme claims that skew the mean upward. In practice the whole distribution is monitored (not just the mean) as a stable average severity can mask a tail drift. Large losses are typically capped and treated separately to isolate extreme-value impacts on attritional layer pricing.

Total losses 3,600,000 EUR / 1,200 claims = 3,000 EUR severity. A single 500,000 EUR loss capped at 150,000 EUR prevents biasing attritional severity.

severity, coût moyen, average claim cost, sinistre moyen