PlumBot: Bot: Creating new article from JSON

2026-03-17T08:47:01Z

Bot: Creating new article from JSON

New page

📐 '''Per-risk''' is a basis of attachment used in [[Definition:Reinsurance | reinsurance]] and [[Definition:Insurance | insurance]] that defines how coverage limits, [[Definition:Retention | retentions]], and recoveries apply individually to each insured risk rather than in aggregate across a portfolio or event. In [[Definition:Excess of loss reinsurance | excess of loss reinsurance]], a per-risk treaty responds when the [[Definition:Loss | loss]] on a single insured risk exceeds the [[Definition:Ceding company | ceding company's]] specified retention, regardless of whether that loss is part of a broader catastrophic event affecting multiple risks. This distinguishes per-risk coverage from [[Definition:Per-occurrence reinsurance | per-occurrence]] or [[Definition:Aggregate reinsurance | aggregate]] structures, where the trigger is tied to total losses from a single event or cumulative losses over a period.

⚙️ A per-risk [[Definition:Excess of loss reinsurance | excess of loss treaty]] typically operates with a defined retention — say, $1 million — and a limit that applies separately to each risk in the ceding insurer's portfolio. If a fire destroys a single commercial building with a [[Definition:Total loss | total loss]] of $5 million, and the ceding insurer's per-risk retention is $1 million, the reinsurer pays $4 million (up to the treaty limit) for that individual risk. The critical underwriting and actuarial challenge lies in defining what constitutes a single "risk" — a determination that varies by [[Definition:Line of business | line of business]], geography, and treaty wording. In [[Definition:Property insurance | property insurance]], a risk is often defined by physical location or a scheduled set of insured values at one premises, while in [[Definition:Marine insurance | marine insurance]], it might refer to a single hull or cargo shipment. Disputes over risk definition can arise when interconnected properties or operations blur the boundaries, making precise treaty language essential. Per-risk treaties are commonly purchased by commercial property insurers and [[Definition:Specialty insurance | specialty carriers]] to protect against large individual losses while retaining smaller, more predictable claims within their own balance sheet.

💡 The per-risk basis plays a foundational role in how insurers structure their [[Definition:Reinsurance program | reinsurance programs]] and manage [[Definition:Volatility | earnings volatility]]. By capping the net cost of any single large loss, per-risk reinsurance allows a [[Definition:Ceding company | ceding company]] to write larger individual risks — or underwrite a broader portfolio of mid-sized risks — than its own capital would prudently support. For [[Definition:Reinsurance | reinsurers]], per-risk treaties offer attractive diversification because they are driven by the frequency and severity of individual loss events rather than by correlated catastrophe scenarios, making them a useful complement to [[Definition:Catastrophe excess of loss | catastrophe excess of loss]] covers. Globally, per-risk excess of loss is a staple product offered by major reinsurers and through [[Definition:Lloyd's of London | Lloyd's]] syndicates, and its pricing reflects the ceding company's [[Definition:Risk profile | risk profile]], [[Definition:Loss experience | loss history]], industry mix, and maximum probable loss characteristics on its largest exposures.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Per-occurrence reinsurance]]
* [[Definition:Retention]]
* [[Definition:Aggregate reinsurance]]
* [[Definition:Reinsurance program]]
* [[Definition:Maximum probable loss (MPL)]]
{{Div col end}}

Definition:Per-risk - Revision history

PlumBot: Bot: Creating new article from JSON