Question 1

When does a top-and-drop cover activate at a lower attachment point?

Accepted Answer

Only once the specified lower layer's reinstatements are fully exhausted — A top-and-drop cover is contingent — it only drops down to a lower attachment point once that lower layer has no further reinstatements left to respond.

Question 2

Why do cedents buy a top-and-drop cover instead of simply buying more reinstatements on the lower layer directly?

Accepted Answer

It gives further limit at the bottom of the tower without paying for full additional reinstatements at the lower layer's own, typically pricier, rate — A top-and-drop cover is a way of buying contingent limit at the bottom of the tower more economically than purchasing full extra reinstatements at the lower layer's own rate.

Top-and-Drop Cover

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