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📋 '''Multiple of rate on line''' is a pricing metric used predominantly in the [[Definition:Reinsurance | reinsurance]] market to express the relationship between the [[Definition:Limit of liability | limit]] provided by a reinsurance contract and the [[Definition:Premium | premium]] charged for that limit. Calculated as the inverse of the [[Definition:Rate on line (ROL) | rate on line]] — that is, the limit divided by the premium — this multiple indicates how many years of premium income it would take, at the current rate, for the [[Definition:Reinsurer | reinsurer]] to accumulate enough premium to cover a full limit loss, assuming no investment income or other adjustments.

⚙️ To illustrate, if a [[Definition:Catastrophe excess of loss reinsurance | catastrophe excess of loss]] layer carries a limit of $50 million and the annual premium is $5 million, the rate on line is 10% and the multiple of rate on line is 10.0×. A higher multiple implies that the reinsurer is collecting a smaller share of the limit each year — suggesting either a low-frequency, high-severity exposure or a highly competitive market driving rates down. Conversely, a lower multiple signals that the reinsurer is recouping the limit more quickly, which is appropriate for layers that are expected to be penetrated more frequently. In practice, [[Definition:Reinsurance broker | reinsurance brokers]] and [[Definition:Underwriter | underwriters]] track this metric across renewal cycles and market segments — particularly in [[Definition:Property catastrophe reinsurance | property catastrophe]] business — to gauge whether pricing adequately reflects the expected [[Definition:Return period | return period]] of losses that could exhaust the layer.

💡 As a benchmarking tool, the multiple of rate on line enables rapid comparisons across different layers, programs, and even geographic markets without needing to dissect the full [[Definition:Actuarial analysis | actuarial]] models behind each placement. During the annual [[Definition:Reinsurance renewal | renewal seasons]] — notably the January 1 renewals that dominate global [[Definition:Property catastrophe reinsurance | property cat]] placements — market commentators in [[Definition:Bermuda market | Bermuda]], [[Definition:Lloyd's of London | London]], Continental Europe, and Singapore routinely reference shifts in multiples of rate on line to characterize whether the market is hardening or softening. However, the metric has limitations: it does not account for the shape of the [[Definition:Loss distribution | loss distribution]], the attachment point of the layer, or [[Definition:Expected loss | expected loss]] costs, so it is most useful as a complement to — not a substitute for — rigorous [[Definition:Catastrophe model | catastrophe modeling]] and [[Definition:Technical pricing | technical pricing]] analysis.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Rate on line (ROL)]]
* [[Definition:Catastrophe excess of loss reinsurance]]
* [[Definition:Payback period]]
* [[Definition:Technical pricing]]
* [[Definition:Reinsurance pricing]]
* [[Definition:Property catastrophe reinsurance]]
{{Div col end}}

Definition:Multiple of rate on line - Revision history

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