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📅 '''Risks-attaching basis''' is a [[Definition:Reinsurance | reinsurance]] contract structure under which coverage applies to all [[Definition:Insurance policy | policies]] whose inception dates fall within the reinsurance treaty period, regardless of when the [[Definition:Loss | losses]] under those policies actually occur. If a treaty runs from January 1 to December 31, every original policy that incepts during that calendar year is covered for its full term — even if a claim arises after the treaty has expired. This distinguishes the risks-attaching basis from the [[Definition:Losses-occurring basis | losses-occurring basis]], where the trigger is the date of the loss event rather than the date the underlying policy began.

⚙️ Under this structure, the [[Definition:Reinsurance | reinsurer's]] exposure can extend well beyond the treaty's nominal expiration. Consider a 12-month treaty on a risks-attaching basis that covers annual [[Definition:Insurance policy | policies]]: a policy incepting on December 31 of the treaty year will run until the following December 30, meaning the reinsurer remains on risk for losses occurring nearly a full year after the treaty period closes. This "tail" effect is a key consideration in pricing and [[Definition:Reserving | reserving]]. [[Definition:Actuarial science | Actuaries]] must factor in the additional earned exposure and the extended time horizon when estimating [[Definition:Ultimate loss | ultimate losses]]. For the [[Definition:Ceding company | ceding company]], the risks-attaching basis provides certainty that every policy written during the treaty period has reinsurance protection for its entire life, simplifying the matching of [[Definition:Reinsurance | reinsurance]] to the underlying book.

🔍 This basis is prevalent in [[Definition:Proportional reinsurance | proportional treaties]] such as [[Definition:Quota share reinsurance | quota shares]] and [[Definition:Surplus share reinsurance | surplus share]] arrangements, and it is the standard structure used for most [[Definition:Lloyd's | Lloyd's]] [[Definition:Year of account | years of account]]. It works particularly well when the ceding insurer wants to ensure continuity of cover for policies already in force, avoiding the gap risk that can arise under losses-occurring treaties when a policy straddles two treaty periods. However, the extended runoff period demands robust data exchange between [[Definition:Ceding company | cedant]] and reinsurer, and contract wording must clearly define how [[Definition:Bordereau | bordereaux]] reporting and [[Definition:Premium | premium]] adjustments will operate during and after the treaty term.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Losses-occurring basis]]
* [[Definition:Reinsurance treaty]]
* [[Definition:Proportional reinsurance]]
* [[Definition:Year of account]]
* [[Definition:Ceding company]]
* [[Definition:Earned premium]]
{{Div col end}}

Definition:Risks-attaching basis - Revision history

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