[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Large Loss Exclusion** ## Definition ==Large Loss Exclusion== is a ratemaking technique where losses exceeding a threshold are completely removed from the experience data rather than just capped. ## Methodology ``` Exclude claims where: Loss > Threshold Then either: a) Provide no load for large losses (conservative) b) Add separate provision based on expected large losses ``` ## When to Use - Losses are truly extraordinary - Insufficient data to predict large losses - Reinsurance covers large losses - Want stable base rates ## Related Concepts - [[Large Loss#Definition]] - [[Large Loss Capping#Definition]] ## References - Werner & Modlin, Chapter 9