1. Rating method. The underwriter bases his price on expected loss frequency over a period of time. If a loss is forecast every five years, the risk premium, ignoring expenses and profit margins, is the limit of cover divided by five, giving a five-year pay back. When quoted as a percentage of the limit, the rate is termed ‘rate on the line, the inverse of pay back, so 20 per cent means five-year pay back. 2. Pay back to reinsurer following a major loss or losses. The renewal premium is increased for a period during which time the contract is in ‘pay back’.