What is burning cost in SAP FS-RI - Reinsurance?

SAP Term: burning cost

• Component: FS-RI

• Component Name: Reinsurance

• Description: The calculation of the reinsurer's fee from excess of loss reinsurance treaties XL taking into account the expected loss load of a portfolio. The past loss experience actual losses that occurred is projected to the future loss potential empirical approach. The burning cost represents the risk premium that the reinsurer would have needed in the past to cover the losses that occurred.

Smart SAP Assistant

• Key Concepts: 
  Burning cost is a term used in the FS-RI Reinsurance component of SAP. It is the amount of money that an insurer pays out to cover the cost of a claim. Burning cost is calculated by subtracting the amount of money that was received from reinsurance from the total amount of money paid out for a claim. 
  
  How to use it: 
  In order to calculate burning cost, you must first determine the total amount of money paid out for a claim. This includes any payments made by the insurer, as well as any payments received from reinsurance. Once you have this figure, you can then subtract the amount of money received from reinsurance from the total amount paid out for the claim. This will give you the burning cost. 
  
  Tips & Tricks: 
  When calculating burning cost, it is important to remember that any payments received from reinsurance should be subtracted from the total amount paid out for a claim. This will ensure that you are accurately calculating the burning cost. 
  
  Related Information: 
  Burning cost is an important concept in reinsurance and can be used to help insurers manage their risk and ensure that they are not overpaying for claims. It is also important to understand how burning cost works in order to accurately calculate premiums and other costs associated with reinsurance.