Insurance pricing and increased limits ratemaking by proportional hazards transforms

This paper proposes a new premium principle, where risk loadings are imposed by a proportional decrease in the hazard rates. This premium principle is scale invariant and additive for layers. It is shown that this principle will generate stop-loss contracts as optimal reinsurance arrangements in a competitive market when the reinsurer is less risk-averse than the direct insurer. Finally, increased limits factors are calculated based on this principle.