PlumBot: Bot: Creating new article from JSON

2026-03-10T13:36:31Z

Bot: Creating new article from JSON

New page

📋 '''Per risk excess of loss reinsurance''' is a type of [[Definition:Excess of loss reinsurance | excess of loss reinsurance]] treaty in which the [[Definition:Reinsurance | reinsurer]] indemnifies the [[Definition:Cedent | ceding company]] for the portion of a loss on any single risk that exceeds a specified [[Definition:Retention | retention]], up to a defined limit. Unlike [[Definition:Catastrophe excess of loss reinsurance | catastrophe excess of loss]] treaties that aggregate losses across multiple risks arising from a single event, this structure attaches at the individual-risk level—meaning each [[Definition:Insurance policy | policy]] or scheduled risk is evaluated independently against the retention threshold. It is a foundational tool in [[Definition:Property insurance | property]] and [[Definition:Casualty insurance | casualty]] reinsurance programs.

🔧 The mechanics hinge on how a "risk" is defined in the treaty wording. For a [[Definition:Commercial property insurance | commercial property]] book, one risk might correspond to a single building or a group of buildings at one location. The ceding insurer sets its net retention—say, $2 million per risk—and the per risk excess treaty responds when any individual loss surpasses that amount, paying the excess up to the treaty's limit, perhaps $8 million in excess of $2 million. Each qualifying loss is adjusted separately: if a windstorm damages three separate risks, each loss is measured against the retention on its own, producing up to three separate recoveries. [[Definition:Reinstatement | Reinstatement]] provisions typically allow the cedent to restore coverage after a recovery, usually for an additional [[Definition:Reinstatement premium | reinstatement premium]]. [[Definition:Pricing | Pricing]] depends on the cedent's [[Definition:Loss experience | loss history]], the volatility of the underlying book, and the [[Definition:Attachment point | attachment point]] relative to expected loss severity.

💡 Carriers rely on per risk excess of loss reinsurance to cap the financial damage any single large loss can inflict on their results, enabling them to write policies with higher [[Definition:Policy limit | limits]] than their own balance sheets could comfortably support. Without it, a mid-sized [[Definition:Insurance company | insurer]] accepting a $10 million commercial fire risk would face concentration exposure that could destabilize its [[Definition:Surplus | surplus]]. By transferring the layer above its retention to a reinsurer, the company can compete for larger accounts while maintaining stable [[Definition:Underwriting | underwriting]] results. This treaty type also plays a critical role during [[Definition:Reinsurance renewal | renewal]] negotiations, as changes to retention levels and pricing signal broader market conditions and the [[Definition:Underwriting cycle | underwriting cycle's]] trajectory.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Catastrophe excess of loss reinsurance]]
* [[Definition:Retention]]
* [[Definition:Quota share reinsurance]]
* [[Definition:Reinstatement]]
* [[Definition:Treaty reinsurance]]
{{Div col end}}

Definition:Per risk excess of loss reinsurance - Revision history

PlumBot: Bot: Creating new article from JSON