Term Of The Day – Aggregate Stop Loss Reinsurance
The aggregate stop loss reinsurance is a type of reinsurance is becoming very rare and expensive. A form of excess of loss reinsurance which indemnifies the reinsured against the amount by which the re-insureds losses incurred during a specific period exceed either an agreed amount or an agreed percentage of some other business measure. The reinsurer and their insured must have some pre-agreed level that once attained shifts the total risk to the reinsurer.

I have seen this type of reinsurance often in alternate risk work comp policies such as large deductible, captives, and self insurance. One the aggregate level of workers comp claims is “busted”, the reinsurance carrier will be 100% responsible for all the claim payments.
The aggregate is usually a very large amount. The reinsurer does not want to be on the hook for all payments unless the aggregate is huge. I have seen an aggregate level of $20 million or higher in some agreements.
There are many variation on the aggregate stop loss reinsurance theme.
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