ABSTRACT
Exposure method is a method to price an insurance policy when the data for a specific client is not sufficient to produce a reliable severity model. It is based on the use of so-called ‘exposure curves’, which are reengineered severity curves and are usually based on losses from a large number of clients, as collected by large institutions such as Lloyd’s of London or Swiss Re. Ultimately, however, the origins of many of the exposure curves used by underwriters and actuaries in the London market remain mysterious. Actuaries would do well not to consider these curves too dogmatically despite their widespread use.
