✅ What is risk attaching? | Reinsurance tutorials #39

Reinsurance tutorials #39

What is risk attaching?

A reinsurance contract specifies its period of effect: date of inception and date of termination. But the period during which the treaty produces its effects is not to be confused with the period of coverage. The period of coverage determines the period during which the Reinsurer will be responsible for the claim arising from policies or risks ceded during the period of effect of the treaty. This period of coverage might be loss occurring, risk attaching or accounting year.

“Risk attaching” treaty means that the Reinsurer only pays the Ceding party for losses resulting from policies that are issued (new or renewed) or in force with the reinsurance contract period, regardless of the date of occurrence of the losses.

So, let’s take an example:

• An insurance policy is issued on July 2nd 2019.
• The Ceding party purchased a reinsurance contract running from June 1st 2019 to May 31st 2020 on a risk attaching basis.
• A loss occurred on February 5th 2020. It will be covered.
• But if the policy was issued prior to June 1st 2019, it wouldn’t be covered. Indeed, there is no reinsurance coverage for claims originating outside the reinsurance coverage period, even if the losses occurred while the contract was in effect.

With a risk attaching clause, the Reinsurer is then responsible until all policies covered by the reinsurance contract for the concerned underwriting year have expired and all losses have been fully settled.

📺 More episodes to come... Subscribe now to receive them in advance before their public release! 📥