Page 159 - Liability Insurance IC74

Guide for Liability Insurance

bear for its own net account.

This becomes the Underlying limit. If the ultimate net
loss company exceeds this underlying figure, the
reinsurer pays the excess subject to a maximum figure
which is the overlying limit or the limit of the cover under
the treaty.

The term 'ultimate net loss' is defined as the sum paid
by the ceding company in the settlement of all loses
arising out of one event including any adjustment or
litigation or other expenses incurred in connection with
official expenses, excluding employee's salaries and
regular office expenses.

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. In other words, the ultimate net loss means the
actual amount of loss paid plus legal and adjustment
expenses of claim settlement less recoveries in respect
of salvage and amounts recoverable from other
reinsurers. This arrangement is very much necessary
to protect the net account of the insurance company in
the event of catastrophic losses.

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