Page 111 - Liability Insurance IC74

Guide for Liability Insurance

on the maximum amount of loss due to any one cause/
event that is prepared to bear for its own net account.

If the ultimate net loss is arrived at after deduction of
all, recoveries in respect of salvage or otherwise, and
all claims upon other reinsurance, whether recovered
or not. So, in other words, the ultimate net loss means
the actual amount of the loss paid plus legal and
adjustment expenses of claim settlement less recoveries
in respect of salvage, and amounts recoverable from
other insurances .

For e.g, if the underlying and overlying limits are 5 lacs
or 15 lacs respectively, the reinsurers will pay the
ultimate net loss in excess of 5 lacs, but up 15 lakhs. On
the other hand, if the amount of the ultimate net loss is
more than Rs 15 lacs, the excess amount is borne by
the ceding company.

Another Excess of loss treaty may be arranged to pay
Rs 20 lacs in excess of Rs 20 Lacs. To provide further
protection for catastrophe losses, another treaty may
be arranged to pay Rs 60 lacs in excess of Rs 40 lacs.

Thus excess of loss protection can be arranged in layers.
So, if there is a loss of Rs 1 crore, the reinsured will

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