ABSTRACT
Despite its simplicity and its many limitations, burning cost analysis is one of the most widespread pricing techniques, especially in such contexts as the London Market. It is an estimate of the expected losses to a policy (gross, ceded and retained) based on an average of the claims experience in past years, possibly with corrections/adjustments to take claims inflation, changes in exposure and in risk profile, allowance for large losses, incurred but not reported (IBNR) claims, expected changes in reserve and so on, but without any explicit modelling. It therefore builds up on the data summarisation exercise that we described in Section 10.3.
