Question 1

What does a per-risk excess-of-loss layer test against its retention?

Accepted Answer

One individual risk's own loss, independent of what happened to other risks — Per-risk XoL looks at each individual risk's own loss in isolation — it does not care whether other risks were also damaged by the same event.

Question 2

Why would a cedent buy both per-risk and per-occurrence excess-of-loss protection?

Accepted Answer

Per-risk protects against one severe single loss, while per-occurrence protects against an accumulation from one widespread event — different exposures entirely — The two covers protect against fundamentally different exposures — a single catastrophic risk loss versus an accumulation of many moderate losses from one event — so most cedents need both.

Per-Risk vs Per-Occurrence XoL

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