Excess of Loss (XL)

Excess-of-loss (XL) reinsurance responds only when the cedant's losses exceed a defined retention level (attachment point). Unlike proportional treaties, XL reinsurance does not share in attritional losses — it provides protection specifically against large, infrequent events.

Property catastrophe excess-of-loss (cat XL) is the most common form of reinsurance purchased by primary insurers. It is structured in layers: the cedant retains the first $X of loss, the first layer reinsurers cover the next tranche, the second layer the next, and so on up to the programme exhaustion point.

Cat bonds are typically structured to mirror specific XL layers, making them directly comparable to — and increasingly interchangeable with — traditional excess-of-loss reinsurance in peak zones.