Excess of loss

Discussion in 'SP7' started by Milkman, Aug 8, 2016.

  1. Milkman

    Milkman Member

    Hello everybody,

    Sorry if this post is not in suitable place, but I just did not find better place.

    I am quiet new in Insurance market and want to understand excess of loss reinsurance.
    For example, first layer is 1m in excess of 2 m. So if the loss is 1,5m, then reinsurer will pay only 0,5 and insurer 1m, yes?

    Another example. There are two layers. First is 1m in excess of 2m. While the second is 3m in excess of 5m. So if the loss is 4m, how much does reinsurer pay? 2m according the first layer or 1m according the second layer?

    Can, someone, explain this to me? I will be really grateful.
     
  2. Pede

    Pede Member

    No, suggest you look at Subject CA1, ST7 or ST8. Think it's also in CT6. 1m x 2m means nothing payable by reinsurer until loss exceeds 2m. Reinsurer pays all in excess of 2m, up to a max of 1m.

    No. The layers are odd because there's a gap. But aside from that, if there's a loss of 4m, the reinsurer on a 1m x 2m layer will pay 1m, and the reinsurer on the 3m x 5m will pay nothing.

    I think you're confusing your lower and upper limits.
     
  3. Milkman

    Milkman Member

    Thanks, Pede. You are right, I made mistake with layers. It must be opposite. So, if layers are 2m in excess if 1m and 5m in excess of 3, how much does the reinsurer will pay in the second example?
     
  4. Hemant Rupani

    Hemant Rupani Senior Member

    Then for 4m loss- 2m from first layer, 1m from second layer... Net loss 1m
     
  5. Milkman

    Milkman Member

    Thanks! It was helpful.
     

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