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📉 '''Occurrence exceedance probability (OEP)''' is a [[Definition:Catastrophe modeling | catastrophe modeling]] metric that estimates the probability of any single event in a given year producing insured losses exceeding a specified dollar threshold. In the [[Definition:Insurance carrier | insurance]] and [[Definition:Reinsurance | reinsurance]] industries, OEP is one of the foundational outputs of catastrophe risk analysis, used to quantify peak-event exposure from perils like [[Definition:Hurricane | hurricanes]], [[Definition:Earthquake | earthquakes]], and [[Definition:Wildfire | wildfires]]. It answers the question: "What is the likelihood that the largest single loss event in a year will surpass a given amount?" — making it especially relevant for structuring [[Definition:Per-occurrence excess of loss | per-occurrence excess of loss]] reinsurance programs.

📊 Catastrophe model vendors such as RMS, AIR, and CoreLogic generate OEP curves by simulating tens of thousands of potential event years, each containing multiple possible catastrophic events, and then ranking the largest single-event loss within each simulated year. The resulting curve plots loss amounts against their exceedance probabilities — for example, a 1-in-100-year OEP loss (the 1% exceedance probability point) represents the loss level that the single worst event in a year exceeds only once every century on average. [[Definition:Underwriting | Underwriters]], [[Definition:Actuary | actuaries]], and [[Definition:Chief risk officer | chief risk officers]] use OEP alongside its complement, [[Definition:Aggregate exceedance probability (AEP) | aggregate exceedance probability (AEP)]], which measures total annual losses from all events combined, to construct a complete picture of catastrophe exposure.

🎯 OEP plays a central role in several critical industry decisions. [[Definition:Reinsurer | Reinsurers]] rely on OEP return periods to price [[Definition:Catastrophe excess of loss | catastrophe excess of loss]] layers and set [[Definition:Attachment point | attachment points]], while [[Definition:Insurance carrier | primary carriers]] use OEP metrics to manage their [[Definition:Probable maximum loss (PML) | probable maximum loss]] estimates and satisfy [[Definition:Regulatory capital | regulatory capital]] requirements under frameworks like [[Definition:Solvency II | Solvency II]] and [[Definition:Risk-based capital (RBC) | risk-based capital]]. [[Definition:Rating agency | Rating agencies]] also examine OEP exposures when evaluating an insurer's financial strength. Because OEP focuses on single-event severity rather than annual aggregation, it is particularly useful for assessing whether a company's reinsurance program adequately protects against the catastrophic "big one" that could threaten solvency.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Aggregate exceedance probability (AEP)]]
* [[Definition:Catastrophe modeling]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Catastrophe excess of loss]]
* [[Definition:Return period]]
* [[Definition:Solvency II]]
{{Div col end}}

Definition:Occurrence exceedance probability (OEP) - Revision history

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