View source for Definition:Losses occurring

📋 '''Losses occurring''' is a [[Definition:Reinsurance | reinsurance]] contract triggering basis under which the [[Definition:Reinsurer | reinsurer]] responds to losses that take place during the defined contract period, regardless of when the underlying [[Definition:Insurance policy | policies]] incepted or when the [[Definition:Claim | claims]] are reported. It stands as one of the principal coverage trigger mechanisms alongside [[Definition:Risks attaching | risks attaching]] and [[Definition:Claims made | claims made]], and its selection has significant implications for how exposure is allocated between successive reinsurance contracts. The losses-occurring basis is widely used in [[Definition:Excess of loss reinsurance | excess-of-loss reinsurance]] placements across global markets, from [[Definition:Lloyd's of London | Lloyd's]] to Continental European and Asian treaty programs.

🔧 Under this basis, the key determinant is the date of the loss event itself — not the inception date of the original [[Definition:Direct insurance | direct policy]] or the date on which the insured reports the claim to the [[Definition:Ceding company | cedant]]. For example, if a reinsurance treaty with a losses-occurring trigger runs from January 1 to December 31, it covers any qualifying loss event happening within that calendar year, even if the original policy was written in a prior year or the claim is not reported until well after the treaty expires. This creates a clean delineation by event timing but can produce exposure to [[Definition:Incurred but not reported (IBNR) | late-reported claims]], since the reinsurer remains liable for events within the treaty period no matter how long notification is delayed. To manage this tail, many contracts include a [[Definition:Sunset clause | sunset clause]] or reporting-period limitation that caps the window during which claims can be presented.

🌍 Choosing between losses occurring and alternative trigger bases carries strategic consequences for both [[Definition:Ceding company | cedants]] and reinsurers. The losses-occurring basis provides seamless coverage across a cedant's entire in-force book during the treaty period — there are no gaps caused by policies incepting before the treaty's start date, which can be a vulnerability under [[Definition:Risks attaching | risks-attaching]] structures. However, the open-ended reporting tail means reinsurers must hold reserves for longer, creating [[Definition:Reserve uncertainty | reserve uncertainty]] that is reflected in pricing and contract terms. In [[Definition:Catastrophe reinsurance | catastrophe reinsurance]], losses occurring is the dominant basis because natural disasters affect the entire portfolio simultaneously regardless of individual policy inception dates. Understanding these dynamics is essential for [[Definition:Reinsurance broker | brokers]] structuring programs, actuaries reserving for reinsurance recoverables, and regulators assessing the adequacy of reinsurance protection.

'''Related concepts:'''
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* [[Definition:Risks attaching]]
* [[Definition:Claims made]]
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Sunset clause]]
* [[Definition:Catastrophe reinsurance]]
* [[Definition:Incurred but not reported (IBNR)]]
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