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📋 '''Dedicated limit''' is an [[Definition:Insurance | insurance]] or [[Definition:Reinsurance | reinsurance]] arrangement in which a specified amount of [[Definition:Policy limit | coverage capacity]] is allocated exclusively to a particular risk, coverage section, peril, or named insured, rather than being shared across a broader portfolio or program. In contrast to a [[Definition:Shared limit | shared limit]] — where multiple exposures draw from a common pool of coverage — a dedicated limit guarantees that the full amount remains available for the specific purpose to which it is assigned, regardless of losses occurring elsewhere in the program.

⚙️ Dedicated limits appear across a range of program structures. In a [[Definition:Multinational insurance program | multinational insurance program]], a parent company might secure a dedicated [[Definition:Professional liability insurance | professional liability]] limit for a high-risk subsidiary rather than allowing that entity to compete for capacity under the group's shared [[Definition:Aggregate limit | aggregate]]. In [[Definition:Reinsurance | reinsurance]], a [[Definition:Cedant | cedant]] may negotiate a dedicated limit within an [[Definition:Excess of loss reinsurance | excess of loss treaty]] for a specific [[Definition:Line of business | line of business]] — ensuring that catastrophic losses in property, for instance, do not consume capacity meant for casualty claims. The [[Definition:Underwriter | underwriter]] or reinsurer pricing a dedicated limit must assess the standalone exposure it protects, since the limit cannot be cross-subsidized by favorable experience on other parts of the program.

💡 For risk managers, the choice between dedicated and shared limits involves a fundamental trade-off between certainty and cost. A dedicated limit provides assurance that capacity will be there when needed, but it typically carries a higher [[Definition:Premium | premium]] than the equivalent share of a pooled limit because the insurer cannot diversify the exposure. Conversely, a shared limit is more capital-efficient in benign loss years but introduces the danger that an unrelated claim elsewhere in the program could exhaust or erode the available coverage. This dynamic becomes particularly consequential in [[Definition:Directors and officers liability insurance | D&O]] and [[Definition:Cyber insurance | cyber]] programs where individual claim severity can approach program limits. Structuring the right balance between dedicated and shared limits is one of the more nuanced aspects of [[Definition:Insurance program design | program design]], and it requires close collaboration among the [[Definition:Insurance broker | broker]], the insured, and participating [[Definition:Insurance carrier | carriers]].

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Shared limit]]
* [[Definition:Aggregate limit]]
* [[Definition:Policy limit]]
* [[Definition:Sublimit]]
* [[Definition:Insurance layer]]
* [[Definition:Insurance program design]]
{{Div col end}}

Definition:Dedicated limit - Revision history

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