Net losses
Gross losses less reinsurance recoveries: the loss burden the cedant actually bears.
Net losses are gross losses minus reinsurance recoveries, received or expected. They are the burden the cedant actually bears and the numerator of the net loss ratio. The gap between gross and net can be very large in catastrophe years, which justifies investing in the reinsurance program. In reserving, net reserves are gross reserves less the reinsurers' share of reserves.
Textbook case, a hailstorm: gross losses of 12 M EUR, cat XL recoveries of 7 M EUR, so net losses of 5 M EUR, which is the retention level.
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