A stratum of cover between the upper limit of the primary insurer and the attachment point of the excess or umbrella insurer. The ‘buffer layer’ fills the gap. Example: total policy limit of £10 million is arranged as follows: primary layer = £1 million; buffer layer is £1 million in excess of £1 million and the excess/umbrella layer is £8 million in excess of £2 million. In reinsurance terms the buffer layer sits between the working cover/layer and the catastrophe layer. It absorbs relatively large losses that do not occur annually, but do so with some regularity.
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The buffer layer is the layer of insurance that resides between the primary layer and the excess layer. For example, suppose Marcia wants to purchase a business umbrella liability, but she is required to carry underlying comprehensive general liability limits of at least $500,000. Marcia has only $300,000 liability coverage and her current insurance company will not increase the primary coverage. Marcia either faces a $200,000 gap in coverage or purchases a $200,000 “buffer.”