Non-Proportional CoversApplied

Hours Clause

Bundling many losses into "one event"

The clause that defines how long a catastrophe can run and still count as a single occurrence for the layer.

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Definition

An hours clause lets a cedent aggregate all individual losses arising from a single natural catastrophe into one occurrence, provided they fall within an agreed continuous time window — commonly 72 hours for windstorm, 168 hours for earthquake including aftershocks. Every loss inside the window counts once toward the layer's attachment and limit; losses outside it are a separate occurrence with their own retention.

Without an hours clause, a cedent would in principle have to treat every individual claim, or every discrete gust of a multi-day storm, as its own occurrence — impossible to administer and far below any sensible attachment point.
The cedent chooses when to start the clock, subject to the clause's own rules, often the moment of first loss, and that choice can matter: starting it one hour earlier or later can pull a loss inside or outside the window.
A slow-moving or unusually long event can outlast the window entirely, forcing the cedent to declare two or more occurrences from what commercially felt like one storm — each with its own retention.

One occurrence = All losses within one continuous hours-clause window (typically 72h wind / 168h earthquake)

Losses outside the window are a separate occurrence with a fresh retention.

Worked example

A hurricane makes landfall and weakens, then a second cell re-intensifies and causes further damage 80 hours after the first loss under a 72-hour clause. The two phases cannot be combined into one occurrence — the cedent declares two, each attaching separately.

Scenario · figures in USD

One storm, two occurrences, because of the clock

Meridian Coastal buys $30M xs $10M per occurrence, with a 72-hour hours clause for windstorm. A hurricane causes losses over a five-day period: $24M in the first 72 hours, then a further $14M from hour 73 to hour 120 as a second landfall from the same weather system hits a neighbouring state.

Losses within the first 72-hour window	$24M
Occurrence 1 recovery ($24M − $10M retention)	$14M
Losses from hour 73 onward — a fresh window	$14M
Occurrence 2 recovery ($14M − $10M retention)	$4M
Total recovered across both occurrences	$18M
What one combined $38M occurrence would have recovered	$28M ($38M − $10M retention, well within the $30M limit)

So whatSplitting into two occurrences cost this cedent $10M of recovery compared with one combined event — a second retention applied because the storm outlasted the clock. The hours clause protects the reinsurer from an unbounded definition of "one event"; it does not always help the cedent.

Check your understanding

What does an hours clause let a cedent do?

Bundle all losses from a single catastrophe within an agreed time window into one occurrence. The clause exists specifically to let many individual claims from one catastrophe be treated as a single occurrence for the layer.

A catastrophe's losses span longer than the hours-clause window. What is the practical consequence for the cedent?

The event must be split into two or more occurrences, each with its own retention. Once losses fall outside the continuous window, they cannot be combined with the first occurrence and must be declared separately, retention and all.

Word problem

A cedent holds $40M xs $15M per occurrence with a 72-hour hours clause. A slow-moving storm causes $28M of loss in the first 72 hours and a further $19M in the next 72 hours, as the same system stalls and re-strengthens. Calculate the total recovery across the two occurrences this creates, and compare it with what a single combined occurrence would have recovered.

Show a hint

Apply the $15M retention separately to each 72-hour window, then add the recoveries — and separately add the two loss figures for the hypothetical combined case.

Reveal the worked answer

Occurrence 1: $28M − $15M retention = $13M recovery
Occurrence 2: $19M − $15M retention = $4M recovery
Total recovered across two occurrences = $13M + $4M = $17M
Combined hypothetical loss = $28M + $19M = $47M
A single occurrence would recover $47M − $15M = $32M (within the $40M limit)

Two occurrences recover $17M; one combined occurrence would have recovered $32M — a $15M gap, exactly one extra retention, because the storm outlasted the 72-hour window and forced a second clock to start. The hours clause is a precise, mechanical rule, and precisely where a cedent's luck runs out when a real storm does not behave like a tidy 72-hour event.