Page 181 - Liability Insurance IC74

Guide for Liability Insurance

Here, the Reinsurer pays to the Company the ultimate
net loss in excess of a particular pre-decided amount,
arising out of any one claim or series of claims due to
the same cause, under public liability and employer's
liability policies issued by the Company, whether direct
or by way of reinsurance.

The ceding company decides 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.

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