Pro rata allocation apportions a continuing loss across the policy periods it spans, most commonly by the number of years each insurer was on the risk, sometimes weighted by limits.
Years in which the policyholder had no coverage or was self-insured are generally assigned to the policyholder.
Alternative Names:
Time on the Risk, Proration
Why it Matters?
The assignment of uninsured years is where this method most affects policyholders, since periods before a coverage type was available or after a market exit become the insured's own share. That treatment is contested, particularly for years when coverage for the risk was unavailable at any price. The choice between pro rata and all sums frequently determines whether available limits are adequate to fund a long-tail liability.
Frequently Confused with
Related terms
Frequently asked questions
How is the pro rata share calculated?
Who bears uninsured years?
