Attritional losses

Attritional losses are the many small claims whose regularity lets the law of large numbers do its work, as opposed to large one-off losses that can wipe out a whole year and catastrophe losses that hit a thousand policies at once. The dividing line is a per-claim threshold set by the book or by the treaty, and everything below it is attritional. The attritional loss ratio puts those claims over earned premium, and the total loss ratio splits into attritional plus large plus cat. Actuarial pricing rests on them: they give a meaningful average and a frequency you can estimate. Attritional claims are priced on experience, while large losses get loaded through exposure rating or a smoothed burning cost. In reinsurance they sit almost entirely below an excess of loss retention and are ceded only under a quota share, so a cedant whose attritional ratio drifts sees its result slip without any treaty noticing. Some markets have almost none by design. Space insurance is one. A book of a few dozen satellites, each worth a year of premium, mostly sees heavy losses: a total loss at launch, or a partial failure in orbit (solar array, propulsion). That makes it closer to a gaming table than to an insurance portfolio in the actuarial sense.