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📘 '''Losses occurring basis''' is a [[Definition:Reinsurance | reinsurance]] contract structure under which the reinsurer covers losses arising from events that occur during the defined contract period, regardless of when the underlying [[Definition:Insurance policy | insurance policies]] were originally written or when the [[Definition:Claim | claims]] are eventually reported and settled. This stands in contrast to a [[Definition:Risks attaching basis | risks attaching basis]], where coverage applies to policies incepting during the treaty period. The losses occurring approach is one of the two fundamental structures used in [[Definition:Treaty reinsurance | treaty reinsurance]] worldwide, and understanding the distinction is essential for anyone involved in reinsurance placement, [[Definition:Reserving | reserving]], or [[Definition:Ceded reinsurance | ceded reinsurance]] accounting.

🔄 Under a losses occurring treaty, the trigger is the date of the loss event itself. If a [[Definition:Catastrophe | catastrophe]] strikes on March 15 and the treaty runs from January 1 to December 31, the reinsurer responds — even if the affected original policies were bound years earlier. This makes losses occurring treaties particularly intuitive for [[Definition:Excess of loss reinsurance | excess of loss]] programs, including [[Definition:Catastrophe excess of loss | catastrophe excess of loss]] covers, because the reinsurer's exposure aligns with a calendar period rather than with the vintage of the [[Definition:Cedent | cedent's]] portfolio. However, this structure introduces complexity around claims that are reported or develop long after the treaty period expires, particularly in [[Definition:Long-tail business | long-tail lines]] such as [[Definition:Liability insurance | liability]] or [[Definition:Workers' compensation insurance | workers' compensation]]. The reinsurer remains on risk for late-reported events that occurred during the treaty period, which means [[Definition:Incurred but not reported (IBNR) | IBNR]] estimation and [[Definition:Run-off | run-off]] management become critical for both parties.

📊 From a portfolio management perspective, the choice between losses occurring and [[Definition:Risks attaching basis | risks attaching]] has meaningful implications for how [[Definition:Earned premium | earned premium]], [[Definition:Loss ratio | loss ratios]], and [[Definition:Reserve | reserves]] are calculated and matched. Losses occurring treaties tend to provide more immediate alignment between the reinsurance period and the underlying loss experience of a given calendar year, which simplifies financial reporting in some respects. However, they can also create gaps or overlaps in coverage when a cedent transitions between treaties or changes reinsurance structures, requiring careful attention during [[Definition:Reinsurance renewal | renewal]] negotiations. In markets such as [[Definition:Lloyd's of London | Lloyd's]], Continental Europe, and Asia-Pacific, both structures are widely used, and the choice often depends on the class of business, the type of reinsurance arrangement, and the preferences of the parties involved. Regulators and [[Definition:Rating agency | rating agencies]] also pay attention to whether a cedent's reinsurance program provides seamless protection across policy and loss periods.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Risks attaching basis]]
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Treaty reinsurance]]
* [[Definition:Incurred but not reported (IBNR)]]
* [[Definition:Catastrophe excess of loss]]
* [[Definition:Reinsurance contract]]
{{Div col end}}

Definition:Losses occurring basis - Revision history

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