Attachment Point
What Does Attachment Point Mean?
An attachment point is a concept used in reinsurance, referring to the amount a ceding company is responsible for paying when covering a risk. Once a loss surpasses this amount, the reinsurer steps in to cover the excess.
In other words, the attachment point represents the coverage threshold—the point at which excess insurance or reinsurance begins. For example, if the retention on a reinsurance policy is $500,000, the attachment point is $500,000, meaning any losses exceeding this amount will be covered by the reinsurance treaty (typically written as an excess-of-loss treaty). Any losses below this attachment point will be paid by the primary insurance company.
While the term is most commonly used in reinsurance, it can also apply to insureds who purchase supplemental, excess, or umbrella insurance policies. These policies are designed to cover losses once the limits of the primary insurance policy have been reached.
Insuranceopedia Explains Attachment Point
Most states regulate insurance companies to ensure they operate in the public’s best interest and maintain financial stability. As part of this effort, they establish attachment points for policies written within the state.
The attachment point is the amount an insurance company is responsible for covering a risk, as determined by state regulations. The state insurance commissioner sets this amount to ensure the company can financially cover the risk.
For example, if the attachment point for a risk is $100,000, the insurer cannot promise coverage for losses beyond this amount. To comply with state regulations, the insurer must transfer any excess to reinsurers. This prevents insurers from assuming liabilities greater than their ability to pay from liquid capital reserves, protecting their financial stability.
This is sometimes referred to as a stop-loss or aggregate stop-loss.
In a broader insurance context (outside of reinsurance), the attachment point is the threshold at which supplemental or excess coverage policies activate to cover any shortfalls in the primary policy.
