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📌 Attachment point is the dollar threshold at which a reinsurance contract or an excess insurance layer begins to respond to a loss. In an excess of loss arrangement, the ceding insurer retains all losses up to the attachment point, and the reinsurer picks up the tab only for the portion that exceeds it. Think of it as the boundary line between what the primary carrier keeps on its own books and what it passes along — it anchors the entire structure of a layered program.

⚙️ When structuring a treaty or facultative placement, the attachment point is negotiated alongside the limit and premium. For example, a property catastrophe reinsurance treaty might attach at $50 million, meaning the ceding company absorbs the first $50 million of aggregate or per-occurrence losses before the reinsurer's obligation kicks in. The higher the attachment point, the less frequently the reinsurer will be called upon to pay, which typically translates into a lower rate on line. Actuaries model historical loss experience and catastrophe scenarios to determine where the attachment point should sit so that the retained layer aligns with the insurer's risk appetite and capital position.

💡 Setting the attachment point correctly has cascading effects on an insurer's financial stability and reinsurance program efficiency. If the point is too low, the ceding company pays for reinsurance protection it could comfortably self-fund, eroding profitability. If it is too high, a severe loss could consume capital before the reinsurance layer activates. Regulators and rating agencies scrutinize these thresholds when assessing an insurer's solvency and risk management quality, making the attachment point one of the most consequential numbers on any reinsurance contract.

Related concepts

• Definition:Excess of loss reinsurance
• Definition:Retention
• Definition:Reinsurance layer
• Definition:Catastrophe reinsurance
• Definition:Aggregate deductible
• Definition:Rate on line