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📌 '''Attachment''' in insurance and [[Definition:Reinsurance | reinsurance]] refers to the point at which coverage under a policy or treaty begins to respond — the threshold of [[Definition:Loss | loss]] that must be reached before an insurer or [[Definition:Reinsurer | reinsurer]] becomes obligated to pay. The concept appears in multiple contexts: in [[Definition:Excess of loss reinsurance | excess of loss reinsurance]], the attachment point defines the dollar (or other currency) amount of loss that the [[Definition:Ceding company | ceding company]] must retain before the reinsurer's layer is triggered; in layered [[Definition:Insurance program | insurance programs]], it marks where one layer of coverage ends and the next begins; and in [[Definition:Insurance policy | primary policies]] with [[Definition:Deductible | deductibles]] or [[Definition:Self-insured retention (SIR) | self-insured retentions]], it effectively sets the level at which the insurer's indemnity obligation activates.

⚙️ The attachment point is negotiated as a fundamental term of any layered or excess coverage arrangement. In a typical [[Definition:Excess of loss reinsurance | excess of loss]] reinsurance structure, the ceding insurer retains losses up to the attachment point — say, $10 million — and the reinsurer covers losses in the layer above that amount, up to the [[Definition:Policy limit | limit]] of the reinsurance contract. Higher attachment points generally produce lower [[Definition:Reinsurance premium | reinsurance premiums]] because the reinsurer is exposed to less frequent (though potentially more severe) losses. The choice of attachment is driven by the cedent's [[Definition:Risk appetite | risk appetite]], [[Definition:Capital | capital]] position, historical [[Definition:Loss experience | loss experience]], and the pricing available in the [[Definition:Reinsurance market | reinsurance market]]. In [[Definition:Treaty reinsurance | treaty]] negotiations and [[Definition:Catastrophe bond | catastrophe bond]] structuring, attachment levels are among the most heavily analyzed and debated parameters, since even modest shifts can materially change the [[Definition:Expected loss | expected loss]], [[Definition:Probability of attachment | probability of attachment]], and ultimately the cost of the cover.

💡 Getting the attachment right is one of the central challenges in [[Definition:Risk transfer | risk transfer]] design. Set the attachment too low, and the [[Definition:Ceding company | cedent]] pays more in [[Definition:Reinsurance premium | reinsurance premium]] than the volatility reduction justifies; set it too high, and the retained exposure may exceed what the cedent's [[Definition:Capital | capital]] base or [[Definition:Risk appetite | risk tolerance]] can comfortably absorb. In practice, attachment analysis draws on [[Definition:Actuarial science | actuarial]] modeling, [[Definition:Catastrophe model | catastrophe modeling]], and historical claims data to identify the level that optimally balances cost against protection. The concept is also central to [[Definition:Insurance-linked securities (ILS) | insurance-linked securities]] markets, where investors evaluate [[Definition:Catastrophe bond | catastrophe bonds]] and [[Definition:Industry loss warranty (ILW) | industry loss warranties]] by their attachment probabilities — the likelihood that losses will reach the trigger point. Across both traditional and alternative [[Definition:Risk transfer | risk transfer]] structures, attachment is where the economics of insurance are most visibly negotiated between those who bear risk and those who cede it.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Retention]]
* [[Definition:Deductible]]
* [[Definition:Policy limit]]
* [[Definition:Catastrophe bond]]
* [[Definition:Layered insurance program]]
{{Div col end}}

Definition:Attachment - Revision history

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