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🌪️ '''Return period''' is a statistical measure used in insurance and [[Definition:Catastrophe modeling | catastrophe modeling]] to express the average frequency with which a loss of a given magnitude — or the natural peril event that causes it — is expected to occur. A "100-year return period" event, for instance, carries a 1% probability of occurring in any single year, not a guarantee that it happens once every century. [[Definition:Reinsurance | Reinsurers]], [[Definition:Insurance carrier | primary carriers]], and [[Definition:Catastrophe modeler | catastrophe modelers]] rely heavily on return periods to calibrate [[Definition:Pricing | pricing]], set [[Definition:Attachment point | attachment points]], and evaluate [[Definition:Portfolio | portfolio]] exposure to extreme events such as [[Definition:Hurricane | hurricanes]], [[Definition:Earthquake | earthquakes]], and [[Definition:Flood | floods]].

📈 Catastrophe modeling firms like [[Definition:Risk Management Solutions (RMS) | RMS]], [[Definition:AIR Worldwide | AIR Worldwide]], and [[Definition:CoreLogic | CoreLogic]] generate [[Definition:Exceedance probability curve | exceedance probability curves]] that map loss amounts to return periods across thousands of simulated event scenarios. An insurer examining its [[Definition:Probable maximum loss (PML) | probable maximum loss]] might look at the 250-year return period to understand a tail-risk scenario that regulators and [[Definition:Rating agency | rating agencies]] frequently reference. [[Definition:Reinsurance | Reinsurance]] treaties — especially [[Definition:Excess-of-loss reinsurance | excess-of-loss]] structures — are often priced and structured around specific return-period thresholds, with the [[Definition:Attachment point | attachment point]] set to trigger at, say, a 1-in-50-year loss level and the [[Definition:Exhaustion point | exhaustion point]] extending to the 1-in-250-year level.

⚠️ Misinterpreting return periods remains one of the most common pitfalls in insurance risk communication. Stakeholders sometimes assume that experiencing a "100-year event" resets the clock, when in reality the probability resets independently each year. Accurate communication of these probabilities matters enormously for [[Definition:Capital management | capital management]], [[Definition:Solvency | solvency]] assessments, and regulatory compliance under frameworks like [[Definition:Solvency II | Solvency II]], which explicitly references the 200-year return period for calculating [[Definition:Solvency capital requirement (SCR) | solvency capital requirements]]. As [[Definition:Climate change | climate change]] alters the frequency and severity of extreme weather, recalibrating return periods has become a dynamic and increasingly consequential exercise for the entire insurance value chain.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe modeling]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Exceedance probability curve]]
* [[Definition:Aggregate exceedance probability (AEP)]]
* [[Definition:Occurrence exceedance probability (OEP)]]
* [[Definition:Tail risk]]
{{Div col end}}

Definition:Return period - Revision history

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