Term Of the Day – Reinsurance Aggregate
(a) The dollar amount of reinsurance coverage during one specified period, usually a year, for all reinsurance losses sustained during such period.
(b) A limit of an insurance policy naming the most it will pay for all covered losses sustained during a specific period of time, most commonly a year. Aggregate limits are most often included in liability policies. While not often used in property insurance, aggregates are sometimes included with respect to certain catastrophic exposures, such as, earthquake and flood.
The limits in Workers Comp usually involve both (a) and (b) above. The reinsurance levels cover per claim or the aggregate amount of claims.
This type of limit exists in the self-insurance or large deductible claims markets. When the insured reaches the aggregate amount, the account has “busted: their limit. The reinsurer usually sets the limit at a certain multiple of millions.
Reinsurers monitor this “quiet” deductible closely as most carriers or TPA’s report when single claims reach a certain reinsurance level. However, the aggregate may not have a per-claim reporting requirement.