What is pro rata capita in SAP FS-RI - Reinsurance?

SAP Term: pro rata capita

• Component: FS-RI

• Component Name: Reinsurance

• Description: The method of calculating the additional premium for reinstatements below excess of loss. In the p.r.c. method that is mainly used today the reinstatement premium is calculated as a ratio of the reinsurance loss in the layer to the annual premium, irrespective of how much of the indemnity period had passed before the loss was entered.

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• Key Concepts: 
  Pro rata capita is a reinsurance term used in the FS-RI Reinsurance component of SAP. It is a method of calculating the amount of reinsurance that an insurer needs to purchase in order to cover a certain risk. The calculation is based on the number of people or entities that are exposed to the risk, and the amount of coverage needed for each person or entity. 
  
  How to use it: 
  In order to use pro rata capita, an insurer must first determine the total amount of coverage needed for the risk. This can be done by calculating the total value of assets exposed to the risk, or by estimating the total cost of potential losses due to the risk. Once this amount is determined, the insurer can then calculate the amount of reinsurance needed by dividing the total coverage amount by the number of people or entities exposed to the risk. 
  
  Tips & Tricks: 
  When calculating pro rata capita, it is important to consider any additional factors that may affect the amount of coverage needed. For example, if some people or entities are more likely to suffer losses due to the risk than others, then they should be given a higher proportion of coverage. Additionally, if there are any special circumstances that could affect the amount of coverage needed, such as a high-risk area or a large number of people exposed to the risk, then these should also be taken into account when calculating pro rata capita. 
  
  Related Information: 
  Pro rata capita is just one method of calculating reinsurance needs. Other methods include proportional reinsurance and excess-of-loss reinsurance. Additionally, there are other factors that can affect an insurer’s reinsurance needs, such as their financial strength and their ability to absorb losses. It is important for insurers to consider all these factors when determining their reinsurance needs.