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Insurance Glossary

Excess of Loss

Industry

Definition

A non-proportional reinsurance arrangement where the reinsurer pays losses that exceed a specified amount (attachment point), up to a maximum limit. The reinsurer only responds when losses exceed the retention, regardless of premium sharing.

Definición en Español

ES

Exceso de Pérdida

Un arreglo de reaseguro no proporcional donde el reasegurador paga pérdidas que exceden una cantidad especificada (punto de adhesión), hasta un límite máximo. El reasegurador solo responde cuando las pérdidas exceden la retención, independientemente del reparto de primas.

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Related Terms

Non-Proportional Reinsurance
A reinsurance arrangement where the reinsurer pays only when losses exceed a specified threshold, regardless of premium sharing. Includes excess of loss and stop loss arrangements. The reinsurer's obligation is triggered by the size of the loss, not by a fixed percentage.
Attachment Point
The dollar amount of loss at which reinsurance coverage begins to apply in an excess of loss arrangement. For example, if the attachment point is $1 million, the reinsurer only pays losses exceeding $1 million.
Retention
The amount of risk that the ceding company keeps for its own account before reinsurance coverage applies. Also called the deductible or attachment point in some contexts. Higher retention means the ceding company bears more risk but pays lower reinsurance premiums.
Actuary
A business professional who analyzes probabilities of risk and risk management, including calculation of premiums, dividends, and other applicable insurance industry standards.
Loss
The basis of a claim for damages under the terms of an insurance policy.
Underwriting
The process by which an insurer evaluates the risk of insuring a person or property and determines coverage terms and premium rates.
Loss Ratio
The ratio of losses paid plus loss reserves to premiums earned, used by insurers to measure underwriting profitability and pricing adequacy.
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