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Financial advisory
RES5Financial Advisory Services✓Under a '$1,000,000 excess of $250,000' cover, a loss of $1,600,000 occurs. How is the loss split between insurer, reinsurer and any uninsured amount?
The insurer keeps the first $250,000. The reinsurer covers the next $1,000,000 (up to the top of the layer at $1,250,000). The loss is $1,600,000, so the amount above $1,250,000 — namely $350,000 — falls back on the insurer (uninsured by this layer). Insurer $250,000 + reinsurer $1,000,000 + $350,000 = $1,600,000.
Losses above the top of the excess-of-loss layer drop back onto the cedant unless a higher layer is bought.
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