What is CAT XOL reinsurance?

CAT XOL is catastrophe excess of loss. It is treaty cover for an accumulation from one event, not for one policy's large loss. Hurricanes, earthquakes, floods, wildfires. The reinsurer responds when the cedent's retained losses from that event exceed an attachment, up to a limit. Per-risk excess is a different product. Do not administer them as if the slide said XoL and that was enough.

The event definition is the contract. Hours clauses cut weather events. Two storms may be one event or two, according to the wording, not according to the news headline. If you cannot cite the hours clause, you do not have a CAT XOL you can settle. You have a heading.

How it works

Structure is ordinary. Attachment is where cover starts. Limit is where it stops. Exhaustion is attachment plus limit. Reinstatement says whether capacity comes back, free or paid, automatic or not, once or more. "Two reinstatements" in a summary is not a formula. The premium for a paid reinstatement is in the wording or it is a gap.

Pricing consumes documents. Exposure. Event loss tables if the cedent attached them. Current attachment, limit, hours, and event definition cited from the wording you intend to bind. A model narrative without a file is not an input. It is a paragraph.

Claims administration is an event pack. Paid plus outstanding on policies that fall inside the event definition, inside the period, inside the territory. Hours start at a cited time, or they do not start. Recoveries stop at the cited limit. The next question after exhaustion is reinstatement, not a silent extra recovery.

Worked example

A property catastrophe treaty attaches at USD 25,000,000 any one event, limit USD 50,000,000. A named windstorm produces an event aggregate of USD 31,200,000. One contributing risk is ACME Construction Ltd, acme.example. The warehouse on the schedule takes USD 8,400,000 of that aggregate. Recovery on the layer is USD 6,200,000 if the event is one event and if ACME is on cover.

The placing file for ACME still shows slip TIV USD 42,000,000 versus schedule TIV USD 47,100,000, and no hours clause in the pack. If the warehouse was never on the slip, the ACME contribution is a coverage fight inside the event, not a rounding difference on the aggregate. If the hours clause is missing from the treaty wording extract, you cannot defend a 72-hour cut versus a 168-hour cut. Leave it as a gap. Do not import a market-standard number.

What goes wrong

Event date and report date get swapped on the claims bordereau. Two peaks of the same storm are booked as two attachments because nobody opened the hours clause. ACME's warehouse is in the event total and not on the placing schedule. Reinstatement premium is calculated from the covering email. Attachment is taken from last year's slip because this year's wording was not in the zip.

Related reading

Treaty shapes live on treaty reinsurance. Inbound catastrophe and claims files are reinsurer operations. The short definition of where a layer starts is what is an attachment point in reinsurance?.