Question 1

Where does a buffer layer sit in a typical reinsurance tower?

Accepted Answer

Directly above the cedent's retention and below the main working or catastrophe tower — A buffer layer sits just above the retention, absorbing moderate, frequent losses before they reach the main tower above it.

Question 2

Why is a buffer layer often structured with more limited reinstatements than the layers above it?

Accepted Answer

Because it expects to be hit far more often than the higher layers, so its reinstatement terms reflect that higher frequency — A buffer layer's pricing and reinstatement terms reflect the fact that it absorbs frequency the layers above it are not priced to expect.

Buffer Layer

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