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🏛️ '''Excess-of-loss reinsurance''' is a non-proportional [[Definition:Reinsurance | reinsurance]] arrangement in which the [[Definition:Reinsurer | reinsurer]] indemnifies the [[Definition:Cedent | ceding company]] for the portion of a loss — or group of losses — that exceeds a specified retention, up to an agreed limit. It is one of the most widely used forms of reinsurance in the global market, enabling [[Definition:Insurance carrier | primary insurers]] to protect their net results against large individual claims, catastrophic events, or unexpected accumulations of losses without ceding a proportional share of their entire book of business.

🔄 Structurally, excess-of-loss treaties come in several forms. A per-risk or per-occurrence treaty protects the cedent against a single large loss on an individual risk — common in [[Definition:Property insurance | property]] and [[Definition:Casualty insurance | casualty]] lines. A per-event or [[Definition:Catastrophe reinsurance | catastrophe excess-of-loss]] treaty responds when an event (such as a hurricane or earthquake) generates aggregate losses across many policies that exceed the cedent's retention. An [[Definition:Aggregate excess of loss | aggregate excess-of-loss]] treaty triggers when total losses over a defined period breach a cumulative threshold. Pricing does not follow simple proportional premium-sharing; instead, [[Definition:Actuarial analysis | actuaries]] and reinsurance [[Definition:Underwriting | underwriters]] model expected losses above the retention using historical experience, exposure data, and [[Definition:Catastrophe model | catastrophe models]], arriving at a premium (often expressed as a rate on line) that compensates the reinsurer for the volatility and tail risk it absorbs.

📈 From a strategic standpoint, excess-of-loss reinsurance is indispensable for capital management and earnings stability. A primary insurer can write larger individual risks, enter higher-hazard lines, or expand geographically, knowing that a defined layer of catastrophic or severe loss exposure has been transferred. Regulators and [[Definition:Rating agency | rating agencies]] view a well-structured excess-of-loss program as a sign of prudent [[Definition:Risk management | risk management]], and the terms and pricing of these treaties are closely watched as indicators of the [[Definition:Reinsurance cycle | reinsurance market cycle]]. In recent years, the entry of [[Definition:Insurance-linked securities (ILS) | insurance-linked securities]] and [[Definition:Catastrophe bond | catastrophe bonds]] has introduced alternative capacity to compete with or complement traditional excess-of-loss treaty placements, particularly for peak [[Definition:Catastrophe risk | catastrophe perils]].

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss]]
* [[Definition:Catastrophe reinsurance]]
* [[Definition:Proportional reinsurance]]
* [[Definition:Retention]]
* [[Definition:Reinsurance treaty]]
* [[Definition:Aggregate excess of loss]]
{{Div col end}}

Definition:Excess-of-loss reinsurance - Revision history

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