Loss Occurrence Definition Clause
The loss occurrence definition clause specifies which individual losses count as a single loss occurrence for the purposes of the retention and limit under an excess of loss treaty.
- Clause type
- Definition
- Origin/Market
- Reinsurance market
- Favours
- Insurer
- Negotiability
- Negotiable
Purpose
Whether several individual losses count as one occurrence or as several independent occurrences materially affects how often the retention applies and whether the limit is exhausted. The loss occurrence definition clause sets out, in the abstract, when a causal and temporal-geographic connection between individual losses is sufficient to bundle them into a single occurrence.
Effect and limits
The definition typically combines a common cause (the same natural force or loss-triggering event) with a time and geographic boundary, which is often made more precise by a supplementary hours clause. Without a precise definition, interpretation disputes between cedent and reinsurer regularly arise after major loss events.
Negotiation and practice
The clause is usually negotiated together with the hours clause and the aggregate extension clause, since all three jointly determine how the event is defined. For cat XL programmes, a clear, consistent definition across several layers is particularly important to avoid coverage gaps between layers.