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📐 '''Reinsurance attachment point''' is the predetermined loss threshold at which a [[Definition:Reinsurance | reinsurance]] contract begins to respond, transferring financial responsibility from the [[Definition:Ceding company | ceding insurer]] to the [[Definition:Reinsurer | reinsurer]]. In [[Definition:Excess of loss reinsurance | excess-of-loss]] treaties — the structure where attachment points are most prominent — the ceding company retains all losses up to the attachment point and the reinsurer covers losses above it, up to the treaty's [[Definition:Policy limit | limit]]. The attachment point effectively defines the boundary between [[Definition:Net retention | retained risk]] and [[Definition:Risk transfer | transferred risk]], making it one of the most consequential variables negotiated between cedents and reinsurers.

🧮 Setting the attachment point is a balancing act grounded in [[Definition:Actuarial science | actuarial analysis]], [[Definition:Capital requirement | capital considerations]], and market conditions. A lower attachment point provides the ceding insurer with broader protection and reduces earnings volatility, but it comes at a higher [[Definition:Reinsurance premium | reinsurance premium]] because the reinsurer expects to pay more claims. A higher attachment point keeps more risk — and more [[Definition:Premium | premium]] — on the cedent's balance sheet, lowering reinsurance costs but increasing exposure to large individual losses or [[Definition:Catastrophe loss | catastrophe accumulations]]. During treaty negotiations at renewal conferences such as those held in Monte Carlo or Baden-Baden, the attachment point is debated alongside the [[Definition:Reinsurance limit | limit]], [[Definition:Reinstatement provision | reinstatement provisions]], and [[Definition:Aggregate deductible | aggregate deductibles]], with [[Definition:Reinsurance broker | reinsurance brokers]] modeling various scenarios to optimize the cedent's overall program structure.

🎯 Getting the attachment point right has direct implications for an insurer's financial resilience and competitive positioning. If set too high, the carrier absorbs losses that could impair [[Definition:Surplus | surplus]] and trigger [[Definition:Regulatory scrutiny | regulatory scrutiny]]; if set too low, excess reinsurance spend erodes underwriting margins. The attachment point also influences how [[Definition:Rating agency | rating agencies]] evaluate an insurer's risk profile — agencies assess whether the retained layer is consistent with the company's capitalization and risk appetite. In [[Definition:Catastrophe reinsurance | catastrophe programs]], where single events can generate billions in insured losses, even modest adjustments to the attachment point can shift hundreds of millions of dollars of exposure between parties, underscoring why this seemingly technical parameter carries outsized strategic weight.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Net retention]]
* [[Definition:Ceding company]]
* [[Definition:Reinsurance limit]]
* [[Definition:Catastrophe reinsurance]]
* [[Definition:Reinstatement provision]]
{{Div col end}}

Definition:Reinsurance attachment point - Revision history

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