Carpenter Plan ( Spread Loss Cover, Spread Loss Reinsurance)

Definition of "Carpenter plan ( spread loss cover, spread loss reinsurance)"

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Form of excess of loss reinsurance under which each year's reinsurance premium is determined by the amount of the cedent's excess losses for a given period of time, usually three or five years. Upon renewal, the first year's initial rate is based on the total of three or five years of previous experience, a form of retrospective rating. The Carpenter Plan is particularly relevant to economic conditions in the way it handles the factor of inflation.

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