Text Example - Swing
In the two contracts, it seems like the swing is defined differently. In one case it is a profit swing (without Provisional premium) and in the other one it is a Swing Loss Ratio (+ a provisional premium).
I think I understand the way the evrsionwith Provisional premium is working based on some other forum post, but how does profit swing work?
Do we reduce/increase the premium for each difference between the Swing Profit and the actual profit (without using provisional rate as a intermediary)?
Comments
For the first contract the source describes it as follows: "Secondly, there is a profit commission provision whereby the ceding company will receive a profit commission if the underlying loss ratio is 66% or less with maximum profit provision of 5.0%. The profit provision swings on a one-to-one basis with the loss ratio" It doesnt say how increases, but I believe the profit provision will increase as the loss ratio decreases below 66%, up to a maximum of 5%