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a period of time. It confirms the commonly
known fact that there are large number of small
claims and small number of large claims.

It has been overwhelmingly evident that when
arranged in order of size the loss distribution
produces a fairly consistent pattern which
follows what is known as the 'Pareto" law.

The information available from these loss
distribution curves (also known as Pareto curves)
is of immense value to an excess of loss
underwriter as he is able to immediately see the
proportion of losses likely to be expected at any
excess point. If he is satisfied with the original
level of rates, he can take the same proportion of
the premium as he is going to assume of the
losses.

The following illustrative example of a loss
distribution - Pareto -curve shows the normal
shape or power of the Pareto curve.

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