Page 32 - Reinsurance Management IC85

Reinsurance Management

c. Layering:
Excess of loss reinsurance pays for each and every
loss incurred by the ceding company in excess of
a certain predetermined figure upto a stated
amount. Layering is a term used to describe the
division of excess of loss protection sought in a
number of layers which usually operate
consecutively one on top of the other in the event
of a heavy loss. Layering provides the following
advantages:
i. Layering can increase the availability of market

for cover since some reinsurers favour lower layers
and other prefer catastrophe layers (sleep easy
cover).

ii. The rating of a large cover in a single layer is
difficult and the reinsurer tends to play safe by
charging higher rates. By layering, the ceding
company has every chance to ensure that the
rates charged for different layers are fair and
equitable.

Sashi Publications - www.sashipublications.com 31

ight@ The Insurance Times. 09883398055 / 0988338