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Company's Catastrophe Reinsurance Program
What Happens When There are Losses?
 Loss of Profit Commission in Year #1
"Acceleration Premiums" in Years #1-#5
Additional Premiums in Years #2-#6
Early Introduction of Industry Los Warranties in Years #2 or #3
Increase in Industry Loss Warranties After Third Loss or in Year #5
Penalty Premium to cancel in deficit
Analysis of All Six Years
 It is theoretically posible for the reinsurers to have a loss if the contract runs all six years. Yes, but, is it likely?
With three full-layer hits, the reinsurers' loss ratio would be 92%. At least four losses required before any risk to reinsurers
But to sustain four losses, the third and forth losses must have met a very significant industry loss warranty. The fourth loss was probably a third event during year #5 or #6, Even then, loss ratio is below 112.5%
Few auditors would find this scenario to be a "reasonable possibility" during a six-year period.
If there is risk transfer, it is only in some shorter portion of the contract.
When Would Company Cancel?
Assumption 1: Beginning Year #2, No Loss in Year #1
Assumption 2: Beginning Year #2, Loss in Year #1
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