What is rate on line pricing for excess of loss reinsurance?

Rate on line pricing for excess of loss reinsurance is a method used to determine the cost of reinsurance coverage based on the amount of limit purchased relative to the underlying exposure. It is calculated by dividing the premium charged by the limit of coverage provided, typically expressed as a percentage. This pricing approach helps insurers assess the cost-effectiveness of their reinsurance arrangements and allows for straightforward comparisons across different reinsurance options. It is particularly useful in evaluating the financial impact of catastrophic events on an insurer's portfolio.