RT Journal Article SR Electronic T1 Pricing of Adverse Development Covers Using Option Pricing Methods JF The Journal of Derivatives FD Institutional Investor Journals SP 61 OP 76 DO 10.3905/jod.2021.1.136 VO 29 IS 2 A1 Eric Dal Moro YR 2021 UL https://pm-research.com/content/29/2/61.abstract AB The market for Adverse Development Covers and Loss Portfolio Transfers has been growing in the past few years. Despite this growth, reinsurers are still struggling to define a standard method for pricing such covers. In this context, this article aims at providing an innovative method for pricing such contracts. The proposed method is based on the famous Mack model and fits a Constant Elasticity of Variance (CEV) model to the Mack results (expected value and standard deviation) for each future development year of each accident/underwriting year. Having fitted the CEV model, it is possible to estimate the value of the Adverse Development Covers for each accident/underwriting year using standard European option pricing techniques and to compare this valuation with usual non-life insurance valuation techniques.