Definition of "Stop loss reinsurance"

Protects a cedent against an aggregate amount of claims over a period, in excess of a specified percentage of the earned premium income. Stop loss reinsurance does not cover individual claims. The reinsurer's liability is limited to a stipulated percentage of the loss and/or a maximum dollar amount. The stop loss method protects the cedent against the possibility that the aggregate value of an accumulation of small losses will exceed a specified percentage of earned premium income of a particular class. Stop loss reinsurance is the exact opposite of the quota share reinsurance and surplus reinsurance, and differs considerably from other forms of EXCESS OF LOSS reinsurance. For example, a reinsurer can provide a cedent with 50% of the amount by which aggregate incurred losses of the cedent in any year exceed 70% of the cedent's earned premium income during that year.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Coverage for dispensers of alcoholic beverages against suits arising out of bodily injury and/or property damage caused by its customers to a third party. Establishments covered include ...

Flat dollar amount added to arrive (premium rate per $1000 of face amount x face amount) at the premium. ...

Limited pay whole life policy under which all premium payments have been made. For example, a 20 pay policy is completely paid for after 20 payments; no future premiums have to be made, and ...

Coverage on an all risks basis through an endorsement to a business property insurance policy in which each sign is specifically scheduled, subject to the exclusions of wear and tear, and ...

Type of excess of loss reinsurance in which the insurance company (cedent) cedes its risk of loss on incurred but not reported losses (IBNR) and previously reported losses. ...

Insurance policy sold by nonadmitted insurer. ...

Associated insurers that are under common stock ownership or interlocking directorates. Such an arrangement makes it easier to exchange insurance products for sale to the consumer, reduces ...

Insurance transactions conducted across national boundaries. Such transactions occur when the insurance company sells insurance outside the country of the company's domicile. ...

Authority derived from an agent's contract with an insurance company. ...

Popular Insurance Questions