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🏢 '''Per-risk excess of loss''' is a [[Definition:Non-proportional reinsurance | non-proportional reinsurance]] arrangement under which the [[Definition:Reinsurer | reinsurer]] responds to losses on a single risk — typically a single insured location, policy, or account — that exceed the [[Definition:Cedent | ceding insurer's]] [[Definition:Retention | retention]], up to a stated [[Definition:Reinsurance limit | limit]]. Unlike [[Definition:Catastrophe excess of loss reinsurance | catastrophe excess of loss]], which aggregates losses across many risks hit by one event, this treaty focuses on the severity of an individual risk irrespective of the cause. It is most commonly found in [[Definition:Property insurance | property]] lines and [[Definition:Specialty insurance | specialty classes]] where a single large insured asset can generate outsized losses.

🔧 Consider a property [[Definition:Insurance carrier | carrier]] that writes a book with many mid-market commercial accounts but also insures a handful of high-value manufacturing plants. By purchasing per-risk excess of loss with, say, a $2 million [[Definition:Attachment point | attachment]] and $18 million of cover, the carrier limits its net exposure on any single plant to $2 million while the reinsurer absorbs losses between $2 million and $20 million. [[Definition:Underwriter | Underwriters]] at the ceding company can then write larger individual risks without concentrating too much [[Definition:Net retained liability | net retained liability]], effectively expanding their [[Definition:Underwriting capacity | capacity]]. Pricing is driven by the cedent's [[Definition:Loss experience | loss experience]], the risk profile of the underlying book, and the reinsurer's view of trend — including construction costs and [[Definition:Social inflation | social inflation]] pressures.

📊 For portfolio construction, per-risk excess of loss gives primary insurers considerable strategic flexibility. It smooths out the volatility created by any single bad loss, protects [[Definition:Surplus | surplus]] from shock events, and enables more competitive quoting on larger accounts. [[Definition:Rating agency | Rating agencies]] view well-structured per-risk programs favorably because they demonstrate disciplined [[Definition:Risk management | risk management]]. Cedents often purchase this layer alongside [[Definition:Catastrophe excess of loss reinsurance | catastrophe excess of loss]] to cover both the single-risk severity scenario and the multi-risk event scenario, creating a comprehensive [[Definition:Reinsurance program | reinsurance program]] that addresses different dimensions of loss potential.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Catastrophe excess of loss reinsurance]]
* [[Definition:Per-occurrence excess of loss]]
* [[Definition:Retention]]
* [[Definition:Facultative reinsurance]]
* [[Definition:Non-proportional reinsurance]]
{{Div col end}}

Definition:Per-risk excess of loss - Revision history

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