Annual Aggregate Limit (Maximisation) Clause

Purpose

While the agreed sum insured under AHB clause 6.1 limits indemnity per individual insured event, the annual aggregate limit under clause 6.2 additionally caps the total of all indemnity payments the insurer must make across every insured event in a policy year, at a contractually agreed multiple of the per-occurrence limit. The clause protects the insurer against an unquantifiable accumulation of numerous, otherwise independent individual losses within a single year.

Effect and limits

Once the annual aggregate limit for a policy year has been exhausted, no further cover exists for otherwise valid claims during that period, even where the per-occurrence limit for an individual loss has not been reached. The clause works closely alongside the series loss clause: while the latter bundles several causally connected events into a single insured event, the annual aggregate limit captures the sum of all insured events in the year, including those that are causally unrelated.

Negotiation and practice

The customary multiplier typically ranges from two to four times the per-occurrence limit, depending on the line of business and risk, and is negotiable for larger industrial accounts. Businesses with a high expected claims frequency, for example serial manufacturing or high-volume operations, should periodically review the adequacy of the annual aggregate limit against their loss statistics and negotiate an increase where needed.