An adaptation of an excess of loss reinsurance treaty. The loss ratio of the cedant is ‘stopped’ at an agreed percentage of the premium income with the balance wholly or partly falling to the reinsurer, e.g. 90 per cent of losses in excess of 80 per cent up to 120 per cent or a given monetary amount if occurring sooner. Aggregate excess of loss reinsurance works in the same way but its entry/exit points are monetary amounts not ratios.

An excess of loss reinsurance where the reinsured’s retention and the reinsurer’s limit of liability apply to losses arising from a single occurrence regardless of the number risks or policies involved. This approach may be applied to both liability and property insurances.

In excess of loss reinsurance, the insurer fixes a point up to which he will retain losses for his own account (his retention). This is the excess point as losses above this level will be payable wholly or partly by the reinsurer up to a limit, the second excess point.

Standardised instruments that are bought and sold on a recognised exchange such as the London International Financial Futures and Options Exchange (LIFFE) which launched LIFFE weather futures products, a standardised weather derivative contract, in 2001. These overthe-counter contracts are available to weather-sensitive companies wishing to hedge against the weather risk.

Exclusion of a particular form or type of loss rather than a risk, e.g. fire damage to property undergoing a heating process is excluded. The risk of further damage is not excluded as the insurer will be liable for damage caused by the fire as it spreads. A public liability policy excludes liability for damage to property the insured is working on but does not exclude losses that flow from the initial damage.

A policy provision that eliminates cover in regard to specified property, persons, perils, forms of damage or particular circumstances. The excluded risks may be uninsurable, require special consideration or readily be ‘bought back’ if required. The exclusions may be general, i.e. across all sections of the policy, or section-specific. The insurer must prove that an exception applies unless the exclusion comes in the form of qualifying words in the operative clause. See QUALIFIED PERILS.