Difference in Conditions
33333
The webinar will begin shortly.
There is no audio at this time.
This presentation is being recorded
for your viewing pleasure at a future
date.
100% Participation in
Polling Questions is
required to receive credit for
this class. Even if you do
not intend to receive credit,
please participate in the
polls.
The attendance and proctor forms are
available under ‘Materials’ in the Webinar’s
Console to the right.
The PowerPoint presentation is also
available under ‘Materials’.
You will receive the course number for
your state near the end of class.
Use the ‘chat’ window for questions
Insurance
Community
1
on theUniversity
content.
Welcome to your Insurance
Community University
Audio
• All of you are currently on mute
– Un-mute your own system
– Telephone Option
• Select Telephone on your screen
• Dial in the PIN number so that your number
becomes active
– Microphone and/or Speaker Option
• You can use this option if you have a headset
that you use with your computer
Insurance Community University
2
Participation & Chat Window
• You will receive information from the monitor via
the ‘Chat’ window.
– Please locate window in the control panel
• Q & A is welcomed during the presentation and at
the end of the presentation
• You will find the question box on your control
panel
– Write your question in that box
and send it to the presenter/organizer
• The presenter will take those
• questions in the order submitted
Insurance Community University
3
DOI Requirements
• When you see a slide with the hand up symbol, touch
the “hand” icon on your control panel
– Click ONCE only
• If you do not raise your hand, the monitor will be in
contact with you in the chat box
• If you are in a group, the designated proctor is
responsible to make certain you are all in attendance
at all times
= Hand is down
Insurance Community University
4
Polling
• Throughout the class we will be
conducting periodic polls
• We need 100% participation on the polls
• The polls are intended to check
participation but also to create
discussion topics throughout the
presentation
Insurance Community University
5
Forms To Complete for CE
• After class ends
– Return attendance form
– Proctors – return your form to email
address
• Email address is in chat window or in
email sent to you today
Insurance Community University
6
DOI Requirements
• We will file your hours with the DOI
after the completion of this webinar and
we have received the attendance form.
• You have 48 hours to return the form
• You will be sent a Certificate of
Attendance/Completion by
email. Please retain this for your
records for five years.
Insurance Community University
7
Internet Disruption
• If the presenter looses internet
connection STAY ON THE LINE
• The administrators will communicate
with you
Insurance Community University
Internet Failure
• If the internet fails and all participants
are kicked off line by Go To Training or
other source then the seminar will be
terminated
• You will receive instructions by email as
to how we will proceed
• This is a precautionary notice, only
Insurance Community University
9
This class is being recorded
• Available in the University
• This course is approved for CE in CA
Only
Insurance Community University
Disclaimer
Insurance forms and endorsements vary based on insurance
company; changes in edition dates; regulations; court
decisions; and state jurisdiction. This instructional
materials provided by Insight is intended as a general
guideline and any interpretations provided by the
instructor or the creator(s) of this material do not modify
or revise insurance policy language. In providing these
materials, the authors assume neither liability nor
responsibility to any person or business with respect to
any loss that is alleged to be caused directly or indirectly
as a result of the instructional materials provided.
Copyright 2010 – 2013 All Rights Reserved
www.insurancecommunitycenter.com
Insurance Community University
11
Your Instructor Today
Marjorie L. Segale, AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR
Insurance Community Center, LLC
Director of Education
President: Segale Consulting
marjorie@insurancecommunitycenter.com
714.206.9583
Insurance Community University
12
What This Course Will Cover
• Property policy exclusions
• Earthquake, Flood, Named Storms
– Definitions
– Coverage considerations
– Deductibles
• PML development and concerns
• Structuring coverage
• Coverage review
Insurance Community University
13
Polling Question #1
Insurance Community University
14
Purpose of a Difference in
Conditions Policy
• Designed to provide “all risk” coverage
subject to exclusions broader than CP
Special Form
• Designed to tailor coverage for an
insured’s specific needs
• May be used for international risks
Insurance Community University
15
Purpose of Difference in
Conditions Coverage
• No standard form
– Limited market provided by carriers
•
•
•
•
Used for perils not covered elsewhere
Flood / Water Damage
Earthquake
EQ / Flood
– 80% of the losses covered by DIC insurance
Insurance Community University
16
DIC Development
• Ocean Marine
– DIC purchased by a merchant to fill perils
gap between the open cargo policy and any
insurance required by the merchant’s sale
contract
• Inland Marine
– DIC purchased to provide “All Risk” as a
supplement to the Fire and “Named Perils”
coverage provided.
Insurance Community University
17
DIC Development
• Insurance Forms Today
– Generally the admitted / standard property
form already provides “All Risk” coverage
– The DIC is purchased to provide coverage
for perils excluded in the “All Risk” policy
often for the catastrophe perils
Insurance Community University
18
Supply And Demand In The DIC
Marketplace
• Limited capacity with a limited number
of markets
• Little or no new capacity entering the
market
• Emphasis of underlying acceptability has
moved to the BETTER risk
– Better meaning better construction and
generally newer
Insurance Community University
19
DIC Coverage Trends
• Coverage options are being narrowed
• Policy wording is being clarified,
improved and often times more
restrictive
• Deductibles are larger and more specific
• Not all carriers are willing to follow
other carrier’s DIC forms (no following
form)
Insurance Community University
20
DIC
• The DIC will exclude any loss covered by
the original property policy (referred to
as an “underlying policy”)
• If coverage for the same peril exists in
both policies - the other insurance
clause will be invoked in both policies
Insurance Community University
21
Methods To Exclude Perils
On a DIC
• Exclude the perils covered by the
underlying policy by including a list of
traditional named perils as excluded
perils in the DIC
• Exclude the perils on the underlying
policy by specifically identifying the
specific policy by policy number and
insurer name.
Insurance Community University
22
Methods To Exclude Perils
On a DIC
• Make a statement that all perils covered
by ISO Cause Of Loss Forms are
excluded on the DIC
• Require that the insurance carry an “all
risk” parallel policy whereby DIC applies
only to the differences in coverage on
the DIC and All Risk Policy unless
otherwise excluded
Insurance Community University
23
The Excluded Perils Under a DIC
Policy May Include
• Fire, lightning, explosion, windstorm or
hail, smoke, aircraft or vehicles, riot or
civil commotion, vandalism and
sprinkler leakage
• Explosion of hot water boilers or hot
water heaters, mechanical breakdown
and arcing
– Creates a gap between DIC and Equipment
Breakdown coverages
Insurance Community University
24
DIC Exclusion – Fire and ECE
Insurance Community University
Polling Question #2
Insurance Community University
26
Flood Exposure and Coverage
Options
Insurance Community University
National Flood Insurance
Program
• Why offer NFIP
– Can’t purchase coverage in standard
market
– Forced Placed - Lending Documents
– Capacity reasons
– Carrier requirements (Excess Clause)
Insurance Community University
28
National Flood Insurance
Program
• 100 Year Flood Zones (A and V elevation/wave
wash)
• Limited coverage available on amount
• Limited coverage available based on area
• Limited coverage based on
comprehensiveness of “buy back”
– No Business Income
– No Building Ordinance
• Must purchase as first layer in order to qualify
for FEMA
Insurance Community University
29
National Flood Insurance
Program
• Provides limited coverage
– Real / Personal only
– $500k - Real / $250k - Personal
– Some extensions
– Low Deductibles
– Cheap
Insurance Community University
30
Flood Endorsements
• Endorsements are available with
different insurance companies
modifying the property forms.
– Caution: the endorsements vary as to the
comprehensiveness of coverage and
deductibles applicable.
– Caution: Company endorsements do not
substitute for NFIP to qualify for FEMA
Insurance Community University
31
Combination NFIP and DIC
• Often the most cost effective means of
securing adequate limits
• Flood coverage calls for the purchase of
a maximum available limit under the
NFIP and excess under a DIC
– Caution: the Federal Program’s coverage
may be more restrictive then the DIC or
vice versa
Insurance Community University
32
Difference in Conditions
• Standard / Surplus Line Market (DIC)
– May exclude Flood Hazard Zones
– Large Deductibles ($ or %) w/ Minimums
– Larger limits available
– Can provide coverage for Business Income
and Extra Expense
Insurance Community University
33
Earth Movement, Flood and
Wind
• The typical DIC policy first excludes the
perils
• The form will specifically add back the
named perils of Earth movement, Flood
and wind
Insurance Community University
34
Earth Movement, Flood and
Wind
• Caution:
– It is essential to compare the language of
the Property AND DIC exclusions with the
named peril description providing the
coverage
– The exclusions may be much more
comprehensive then the buy backs
Insurance Community University
35
Property Policy Exclusions
Compared to DIC Coverage
Insurance Community University
Water Damage Exclusion
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body
of water, or their spray, all whether driven by wind or not;
(2) Mudslide or mudflow;
(3) Water that backs up or overflows from a sewer, drain or sump; or
(4) Water under the ground surface pressing on, or flowing or seeping
through:
(a) Foundations, walls, floors or paved surfaces;
(b)Basements, whether paved or not; or
(c) Doors, windows or other openings.
But if Water, as described in g.(1) through g.(4) above, results in fire,
explosion or sprinkler leakage, we will pay for the loss or damage caused
by that fire, explosion or sprinkler leakage.
Insurance Community University
DIC Flood Definition
• Flood means, whether natural or manmade, Flood
waters, surface water, waves, tide or tidal water,
overflow or rupture of a dam, levy, dike, or other
surface containment structure, storm surge, the
rising, overflowing or breaking of boundaries of
natural or manmade bodies of water, or the spray
from any of the foregoing, all whether driven by wind
or not. A tsunami shall not be considered a Flood.
Insurance Community University
Earth Movement Exclusion
b. Earth Movement
(1) Earthquake, including any earth sinking, rising or shifting related to such event;
(2) Landslide, including any earth sinking, rising or shifting related to such event;
(3) Mine subsidence, meaning subsidence of a man-made mine, whether or not
mining activity has ceased;
(4) Earth sinking (other than sinkhole collapse), rising or shifting including
soil conditions which cause settling, cracking or other disarrangement of
foundations or other parts of realty. Soil conditions include contraction,
expansion, freezing, thawing, erosion, improperly compacted soil and the
action of water under the ground surface.
But if Earth Movement, as described in b.(1) through (4) above, results in fire or
explosion, we will pay for the loss or damage caused by that fire or explosion.
(5) Volcanic eruption, explosion or effusion…
Insurance Community University
DIC Earthquake Definition
D. Earth Movement means any natural or manmade:
1. Earthquake, including any earth sinking, rising or shifting related to such
event;
2. Landslide, including any earth sinking, rising or shifting related to such
event;
3. Mine subsidence, meaning subsidence of a man-made mine, whether or
not mining activity has ceased;
4. Earth sinking rising or shifting including soil conditions which cause
settling, cracking or other disarrangement of foundations or other parts
of realty. Soil conditions include contraction, expansion, freezing,
thawing, erosion, improperly compacted soil and the action of water
under the ground surface;
5. Shocks, tremors, mudslide, mud flow, rock falls, volcanic eruption,
sinkhole collapse, subsidence; and includes tsunami.
Insurance Community University
Wind / Hail / Named Storms
• When property is located in a mapped
area that has significant exposure to
wind, storm surge, etc. the property
insurer will often excluded wind/hail
losses.
• The DIC carrier will provide the
coverage, but subject to specific
underwriting, additional premium and
deductibles
Insurance Community University
Wind / Hail Exclusions – CP 10 54
A. The following is added to the Exclusions section and is therefore not a Covered
Cause of Loss:
WINDSTORM OR HAIL
We will not pay for loss or damage:
1. Caused directly or indirectly by Windstorm or Hail, regardless of any other cause
or event that contributes concurrently or in any sequence to the loss or damage;
or
2 Caused by rain, snow, sand or dust, whether driven by wind or not, if that loss or
damage would not have occurred but for the Windstorm or Hail.
But if Windstorm or Hail results in a cause of loss other than rain, snow, sand or
dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the
loss or damage caused by such Covered Cause of Loss. For example, if the
Windstorm or Hail damages a heating system and fire results, the loss or damage
attributable to the fire is covered subject to any other applicable policy provisions.
Insurance Community University
Named Storm Coverage Wording
Named Storm: for Locations wholly or partially within Special Flood Hazard
Areas (SFHA), areas of 100-year flooding as defined by the Federal
Emergency Management Agency (FEMA).
Limit: $ 10,000,000 Regardless of the number of Coverages, Locations or
Perils involved including, but not limited to, all Flood, (however caused)
wind, wind gusts, storm surges, tornados, cyclones, hail, or rain, the
maximum amount the Company will pay per Occurrence as respects all
covered Loss or Damage arising out of a Named Storm (a storm that has
been declared by the National Weather Service to be a Hurricane, Typhoon,
Tropical Cyclone, Tropical Storm, or Tropical Depression). In the event
covered Loss or Damage by Flood arises out of a Named Storm, the
maximum amount the Company will pay per Occurrence for all such Loss or
Damage by Flood shall be the Sublimits of Liability for Flood as shown in
Subparagraphs E.2.a. and E.2.b. above. However, if Flood is not covered, the
maximum amount the Company will pay per Occurrence for all such Loss or
Damage by Named Storm shall exclude Loss or Damage by Flood.
Insurance Community University
Polling Question #2
Insurance Community University
44
Probable Maximum Loss
• Insurance should be placed at limits not
less than the PML
– Concentration of risk
– Geographic impact on loss amount
– Type of loss
• EQ
• Flood
• Wind
Insurance Community University
Coinsurance
• There should be no coinsurance on the
policy
• Often the insured is buying coverage
only at the PML level and NOT at the
entire value of the property
• Cross reference this to the deductible
portion of the policy
Insurance Community University
Covered Property Description
• Definition should be close to the same as the
Commercial Property coverage
– Buildings
– BPP
– PPO
• Caution: For certain catastrophic perils the
property definition must be broader.
Insurance Community University
Covered Property Description
• Watch for excluded or limited property
such as
• Foundations, retaining walls,
• Roofs over 20 years of age (often limited or with a higher
deductible)
Insurance Community University
Examples of Excluded Property
• Land, including land on which the
covered property is located, water,
trees, shrubs, plants, growing crops, and
animals
• Property while underground,
underwater or waterborne
• Buildings or structures in the course of
construction
Insurance Community University
49
Excluded Property
• Dams, bridges, tunnels and pipelines
• Foundations below the surface of the
ground
• Property in transit
Insurance Community University
50
Structuring the Coverage
• Specific Limits
• Blanket Limits
– Reference to SOV on file removes the
blanket advantage
Insurance Community University
Structuring the Coverage
• Single policy
– Purchase insurance equal to total loss
exposure
– Small catastrophic exposure
– No concentration of risk
Insurance Community University
Structuring the Coverage
• Single policy
– Purchase insurance equal to total loss
exposure
– Small catastrophic exposure
– No concentration of risk
Insurance Community University
Structuring the Coverage
• Loss Limit
– Limit that is less than total exposure
• Occurrence loss limit
– This is where an insured buys a limit that is
less than their total exposure to loss.
– Purchase made on Probable Maximum Loss
(PML)
– No coinsurance clause should be applied
Insurance Community University
Occurrence Of Liability
Endorsement (OLL)
The premium for this policy is based upon the Statement
of Values on file with the Company or attached to this
policy. In the event of loss hereunder, liability of the
Company shall be limited to the least of the following:
The actual adjusted amount of loss, less applicable
deductible(s);
The total stated value for the property involved, as shown on
the latest statement of values on file with the company, less
applicable deductibles;
The limit of liability or amount of insurance shown on the face
of this policy or endorsed onto this policy.
Insurance Community University
55
More Than One Company
Providing Coverage
• Participation, Quota
share
– All insurers participating
take a proportionate
share of the limits
provided.
– Each participant accepts a
certain percentage of the
risk in return for the same
share of the premium.
• Excess of Loss (Layering)
– This option is where one or
more participants accept the
“first dollar” of loss, and one
or more participants accept
losses only after the lower
participants’ participation is
fully exhausted.
Insurance Community University
Polling Question #3
Insurance Community University
57
Structuring the Coverage
• Two or more policies
– Layer
• Limits exceed one carrier’s capacity
• Property presents frequency and/or severity
loss exposures
– Participation policies
• One carrier does not have capacity to provide
the excess limits
• Premium will vary depending on the limits
being provided in each layer by carrier
Insurance Community University
Structuring the Coverage
• Layering
– First layer
• Most expensive
– Second layer and subsequent layers
• Placed when first layer underwriter has
reached capacity
• Participation
– More than one insurer on a layer
Insurance Community University
Layering Coverage
• Example:
– $15,000,000 coverage requirement
• 3 carriers each share at $5,000,000 each
• Each carrier shares all loss within the layer and
pays 1/3 of the loss
– $15,000,000 coverage requirement
• 1 carrier has $10,000,000 and pays 2/3 of the
loss
• 2nd carrier has $5,000,000 and pays 1/3 of the
loss
Insurance Community University
Sample Participating Language
Insurance Community University
Critical Considerations in
Layering
• Coverage must match – exactly
• Each carrier provides their own form
and there will be differences
– Follow lead language endorsement
– Not always available
Insurance Community University
Sample Followed Policy
Language
Insurance Community University
Limits Of Insurance
• Defined as the MOST the insurance
company will pay in any one occurrence
• Flood and Earthquake typically have
annual aggregates.
– Annual aggregates apply separately to each
peril, specifically Earthquake and Flood
– Annual aggregate is the most the company
will pay in any annual period
– No reinstatement of aggregate
Insurance Community University
64
Example Of Excess Limit Of
Liability “Drop Down” Clause
It is understood and agreed that in the event of
reduction or exhaustion of the underlying
aggregate limits, this policy shall apply in excess
of the reduced underlying limit, or if such limit is
exhausted, shall apply as underlying insurance,
notwithstanding anything to the contrary in the
terms and conditions of this policy.
In no event, however, shall this Company be
liable for more than the limits of liability
specified by this endorsement.
Insurance Community University
65
Occurrence Language
• Key component
• Earthquake, Flood and Named Storms
typically use a time reference – all loss
within that time frame is deemed to be
one loss
• Earthquake
– 72 hours
– 168 hours
Insurance Community University
Occurrence Language
• Flood / Wind
– 72 hours
• For EQ, Flood, Wind
– Loss or damage must be covered either
before inception (“nose” coverage) or after
expiration (“tail coverage) within the
occurrence definition
Insurance Community University
Polling Question #4
Insurance Community University
68
“Nose” Coverage Language
Exclusion D.6. is replaced by the following:
6. We will not pay for loss or damage caused by or resulting from
any Earthquake or Volcanic Eruption that begins before the
inception of this insurance.
But we will pay for loss or damage by Earthquake or Volcanic
Eruption that occurs on or after the inception of this insurance, if
the series of Earthquake shocks or Volcanic Eruptions began within
72 hours prior to the inception of this insurance.
Insurance Community University
“Tail” Coverage Language
All Earthquake shocks or Volcanic Eruptions that occur
within any 168-hour period will constitute a single
Earthquake or Volcanic Eruption. The expiration of this
policy will not reduce the 168-hour period.
Insurance Community University
Deductibles
• Earthquake Deductible: 10% total INSURED
value at the time of the loss / per unit basis:
building, BPP, BI/EE
• Note that MANY DIC policies have the
deductible taken against INSURABLE value
• Minimum earthquake deductible: $25,000
• Flood Deductible: $50,000 per loss
Insurance Community University
Deductible Buy Down Policies
• Depending on the limits and exposure
for CAT loss, i.e., EQ, Flood, wind, the
deductibles on the DIC policy can be
significant
• Limited number of insurance companies
offer a deductible buy down
Insurance Community University
Buy Down Examples
• LIMIT: The Difference between the original
deductibles being USD 250,000 per Occurrence or
USD 500,000 per Occurrence in respect of locations
with roofs 10 years or older and the Insured’s
Retention.
• Maximum recoverable under this policy USD 450,000
per Occurrence but USD 1,800,000 in the annual
aggregate
• INSURED’S RETENTION: USD 50,000 per Occurrence
locations or coverages involved.
Insurance Community University
Valuation
• Replacement cost subject to SOV / OLL /
Scheduled limits
• Selling price should be requested on mfg
stock / inventory
• A carrier may only allow ACV on old,
unreinforced property
– Must put this in writing to the client
Insurance Community University
Coverage
Enhancements/Endorsements
• Must mimic the Commercial Property
Policy
• Examples:
– Additional Debris removal
• Debris removal should include covered /
uncovered property
– Pollutant clean up and removal from land
or water – ask for increased limit
– Spoilage
Insurance Community University
Coverage
Enhancements/Endorsements
– Ordinance or Law
• Coverage A included within Limit
• B and C - blanket specified limit
– Increased Period of Restoration
– Extended Period of Indemnity 360 days
– Dependent Business Income / Extra
Expense
– Civil Authority
– Ingress / Egress (critical coverage point)
Insurance Community University
Coverage
Enhancements/Endorsements
– Utility Services – Direct and Time Element
• Water, Power, Communication
• Include overhead transmission lines
– Followed policy language over primary or
lead insurer
• May be included but must compare policy
language
Insurance Community University
Coverage
Enhancements/Endorsements
– Followed claim language
• This coverage is often not granted
– Notice / Knowledge of loss limited to
Executive Officer of First Named Insured
– Unintentional failure to disclose included
Insurance Community University
Drop Down Provision / Priority of
Payment Joint Loss Clause
• Background
– Drop Downs
• Only necessary under Primary/Excess
placements, use of inconsistent perils, sublimits
or aggregates (EQ and Flood)
– Priority of Payments
• Similar to a Drop Down - More widely accepted
– Joint Loss
• Used to bridge a Fire, DIC or Boiler policy when
loss is a result of a combined perils
Insurance Community University
79
DIC Coverage Territory
• At the locations shown in the
declarations
– “Per schedule on file with the company”
• Possible expansions
– “All other locations” AOL
– Property in due course of transit
Insurance Community University
80
DIC Coverage Territory Sample
Language #1
We cover property wherever located
within the United States, Canada, Puerto
Rico, Territories, Possessions.
Insurance Community University
81
DIC Coverage Territory Sample
Language #2
This policy insures against all risks of direct
physical loss or damage from any external
cause except as hereafter excluded while
anywhere within the 50 states of the
United States of America and the District
of Columbia.
Insurance Community University
DIC Coverage Territory
• My be written for specified coverage by
state.
– Many DIC’s are written for California ONLY
to add earthquake coverage
Insurance Community University
83
Underwriting Information
Required
Insurance Community University
Underwriting Information
Required
• COPE
– Construction, Occupancy, Protection (private and
public), Exposure
• AGES
– If the buildings are older than 30 years, provide
any structural updates, including roof replacement
– Many buildings may be updated to new seismic
codes for occupant safety, but have little impact on
constructive total loss probability to the structure.
Therefore, will not assist in reducing EQ pricing or
acceptability.
Insurance Community University
85
Underwriting Information
Required
• Statement Of Values
– Provide both the values contained in each
layer and the 100% ground up values of
each item exposing the layer
– Any summary information regarding split of
values by age, construction, and occupancy
can help place excess layers
Insurance Community University
86
Underwriting CAT Loss Information Required
• Loss history, summarized by loss to each
layer under the proposed terms
• Include ground up loss information as
well as losses to each proposed layer
using the proposed deductibles, terms
and conditions
• Catastrophe exposures by statistical or
geographic zone
Insurance Community University
87
Underwriting CAT Loss
Considerations
• Construction considerations, such as
type, age, retrofits to bring to current
code, number of stories, damageability
of contents
• Probable maximum loss
Insurance Community University
88
Underwriting Earthquake
Considerations
• Location considerations such as soils,
liquefaction and landslide potential,
proximity to other risks
• Coverage considerations, such as
building, contents, business
interruption, sprinkler leakage, coverage
for building code upgrades and fire
following the earthquake
Insurance Community University
89
Underwriting Earthquake
Considerations
• Newer construction which meets
current seismic building codes
• Risks of superior construction
• Risks not located on or near major faults
• Risks located on firm natural ground
• Risks with lower liquefaction potential
• Risks which accept reasonable
underlying deductibles
Insurance Community University
90
Polling Question #5
Insurance Community University
91
Proposal from Wholesalers
• Review sub-limits
• Review coverage endorsements,
limitations and enhancements
• Verify that all forms on each layer are
REALLY consistent
– Coverage is often placed based upon
capacity but there has been no conscious
attempt to coordinate coverage terms or
conditions
Insurance Community University
92
Terminology
Insurance Community University
Excess of Loss Terminology
• Primary
– The layer that pays the first dollar of loss after
deductible (if any)
• First Excess
– In a layered structure, the first excess layer is the
first layer above the primary
• Second Excess, etc.
– In a layered structure, this is the next excess of loss
layer above the first excess layer, or the second
layer above the primary;
Insurance Community University
94
Excess of Loss Terminology
• Point of Attachment
– The amount of loss that first penetrates a layer
• Point of Release
– The amount of loss that completely exhausts a
layer
• Mixed Participating and Excess Structure
– A layer structure where a prorata portion of the
structure is shared on a proportional basis, and a
portion of the structure is “internally layered” or
quota shared into two or more layers.
Insurance Community University
95
Excess of Loss Terminology
• Working Layer
– A layer that is expected to have exposure to
frequency losses, or losses considered within the
PML
• Buffer Layer
– A layer that is expected to have lower frequency
than a working layer.
– This layer is expected to only pay loss if some low
probability event occurs.
– This layer would be involved in a Maximum
Foreseeable Loss
Insurance Community University
96
Excess of Loss Terminology
• Capacity Layer
– A layer that has a very low probability of
paying loss
– This layer is often excess of the amount
MFL, or at least only partially exposed to an
MFL event
Insurance Community University
97
Summary
• DIC policy placement is challenging
• Critical components
– KNOWLEDGEABLE wholesaler
– Review of policy language when placing
layers and/or participating insurers
– Disclosure of coverage limitations to client
in writing
Insurance Community University
Upcoming Classes
Upcoming University/Paid CE
ClassesCyber Liability and the
Personal Lines Account
FREE to University Members
$50.00/charge for non university members
11/07
Farm Auto
11/12
Livestock & Dairy
11/14
Trucking
Join the University TODAY. www.insurancecommunitycenter.com
Click Join University at the top of the bar
Upcoming Community Classes FREE to University Members
$25.00/charge for non university members
11/05
Bullying Prevention and Intervention
Program
Insurance Community University
99