Glossary of Reinsurance Terms

Payback

A method of reinsurance rating under which the price is based on how frequently a total loss might occur over a period of time based on historical or projection indications.  Thus, if the indicated or projected loss would occur only once in five years, the price would be set (without regard to expenses and profit margins) to be equal to the limit divided by five and the contract would thus be said to have a "five-year payback." Inverse calculation with Rate-on-Line.