Taking as an example the above question in the old ST3 Exam, could someone highlight to me the operation of the annual aggregate deductible?? Kind Regards,
The annual aggregate deductible has to be fully eroded before any recoveries can be made from the layer. It is only eroded by amounts that would otherwise be recovered from the layer if the aggregate deductible was not in place. So the first claim for £2.5m would normally lead to £1.5m being recovered from the layer. Instead this £1.5m is all used to partially erode the aggregate deductible, leaving £2.5m of aggregate deductible remaining and nothing recovered from the layer so far. The next claim of £3.5m would normally lead to £2.5m being recovered from the layer. Instead this £2.5m is all used to erode the remainder of the aggregate deductible, leaving none of the aggregate deductible remaining and still nothing recovered from the layer so far. From now on claims can be recovered "normally" from the layer, so for claim 3, £4m can be recovered from the layer.
