Excess Of Loss Reinsurance

What Does Excess Of Loss Reinsurance Mean?

Excess of loss reinsurance is a type of reinsurance in which the reinsurer is responsible for covering any losses incurred by the ceding insurance company that exceeds a specified amount. This reinsurance is intended to protect insurance companies from losses beyond their financial capacity to manage.

Insuranceopedia Explains Excess Of Loss Reinsurance

Many insurance companies opt for excess of loss reinsurance if they are concerned about assuming excessive risk. In such cases, excess of loss reinsurance provides protection if their losses exceed a specified amount. For example, if an insurance company purchases an excess of loss reinsurance policy with a loss limit of $1,000,000 and incurs $1,500,000 in losses, the reinsurance company will be responsible for reimbursing $500,000 of the losses.