A single hurricane or earthquake can generate losses far beyond normal retention. Catastrophe excess of loss is a reinsurance cover that protects the cedent against the accumulation of losses arising from one catastrophic event once those losses exceed a predetermined retention.

Coverage is usually written on a per-occurrence basis with an annual aggregate limit. The definition of “loss occurrence” and the hours clause that groups related losses are critical wording points. Recovery is typically a percentage of the excess loss, subject to the reinsurer’s limit.

Pricing relies on catastrophe models that estimate the probability of various loss sizes. After a major event, reinstatement provisions may restore limit for additional events in the same year at an extra premium. The product is a cornerstone of property reinsurance programs in catastrophe-prone regions.

• Reinsurance for losses from one catastrophe above retention
• Usually per-occurrence with annual aggregate
• Relies on catastrophe modeling for pricing
• Often includes reinstatement terms