Catastrophe Excess of Loss (CatXL)

Graphene provides a default built-in template for modelling conventional Catastrophe Excess of Loss (CatXL) contracts. The default template for CatXL supports the following financial features:

• occurrence attachment and limit

• franchise deductible

• zero or more reinstatements of the limit

• upfront premium income and brokerage expense

• reinstatement premium income and brokerage expense

• 2nd, 3rd, etc. event attachment

• contract inception / expiration dates

• participation

• currency exchange

Note

Even though the financial terms are specified as positive values, losses are assumed to be negative in Graphene, so they will be applied as if they are negative. Flowing only positive loss values into the structure will result in zero loss output.

Structure

The general structure of a default CatXL using the built-in template in Graphene is:

{
    "_schema": "CatXL_1.0",
    "inception_date": 1546300800,
    "expiration_date": 1577836800,
    "attachment_value": 1000000,
    "limit_value": 30000,
    "franchise_deductible_value": 1500000,
    "nth": 2,
    "premium_value": 3000,
    "brokerage": 0.1,
    "share": 0.2,
    "reinstatements": [
        {
            "premium_value": 0.75,
            "brokerage": 0.1
        },
        {
            "premium_value": 0.35,
            "brokerage": 0.15
        }
    ],
    "currency": "GBP"
}

Parameters

The parameters are defined as follows:

Parameter Name	Required	Type	Description
inception_date	Yes	double	Timestamp on which the contract incepts. The coverage period is inclusive of this time. See Ledger Format for more details on timestamps.
expiration_date	Yes	double	Timestamp on which the contract expires. The coverage period is exclusive of this time. See Ledger Format for more details on timestamps.
attachment_value	Yes	double	The occurrence attachment or retention of the contract in currency units.
limit_value	Yes	double	The occurrence limit of the contract in currency units.
franchise_deductible_value	No	double	The occurrence franchise deductible of the contract in currency units.
nth	Yes	integer	The event attachment point. This is 1 for first event covers, 2 for second event covers, and so on.
premium_value	Yes	double	The amount of premium paid upfront in currency units. Premium is paid at time of inception.
brokerage	Yes	double	The percentage of brokerage paid on the upfront premium. Brokerage is paid at time of inception.
share	Yes	double	The share or participation assumed for this contract.
reinstatements	Yes	list	The list of reinstatements if any. The list is ordered, with the first element describing the first reinstatement, the second element the second reinstatement, and so on.
reinstatements[].premium_value	Yes	double	The percentage of upfront premium paid as reinstatement premium for the reinstatement. Reinstatement premium is paid proportionally to the amount of reinstated limit at the time of the event.
reinstatements[].brokerage	Yes	double	The percentage of brokerage paid on reinstatement premium earned for this reinstatement. Reinstatement premium brokerage is paid proportionally to the amount of reinstated limit at the time of the event.
currency	No	string	The currency in which the input currency values (attachment_value, limit_value, franchise_deductible_value, premium_value, and reinstatements[].premium_value) are defined. Defaults to the base currency if not set.

Output Records

The CatXL financial structure can produce 5 different types of records:

• Loss: Layered losses, that is losses that are covered by the contract. Losses generally have a negative value.

• Premium: Upfront premium paid at the time of inception. Premium is accounted for as a positive credit.

• BrokerageFee: Upfront premium brokerage paid at the time of inception. Brokerage is accounted as an expense debit with a negative value.

• ReinstatementPremium: Reinstatement premium paid proportionally to the amount of reinstated limit at the time of the event. Positive credit.

• ReinstatementPremiumBrokerage: Reinstatement premium brokerage paid proportionally to the amount of reinstated limit at the time of the event. Negative debit.

References

A detailed description of the financial modelling internals of the CatXL structure can be found in CatXL Financial Modelling Step-By-Step.