Coinsurance and risk layering

For policies on commercial lines of business, insurers often use coinsurance and risk layering to insure risks that are too large for one insurer to cover. For example, a policy that covers a fleet of commercial aircraft uses this model.

In a coinsurance model, several insurers agree to each cover part of a large risk. For example, Insurer A covers 60% of the risk while Insurer B covers 40%.

Coinsurance is typically used with risk layering. Risk layering is applied to a tower, or a set of coverages that are of the same business class. For example, a policy has a tower for property coverages and another for liability coverages. In APD, you specify the business class by applying the section type defined in the SectionType typelist to a clause category.

If you enable coinsurance and risk layering for a product in APD, you can implement a coinsurance and risk layering model when you create a submission in PolicyCenter. In the submission you can:
  • Create a tower that represents the coverages for a business class such as liability.
  • Create risk layers on the tower that specify the limit and excess for each layer.
  • Coinsure a tower or one or more of its layers.

Enable coinsurance and risk layering

About this task

In an APD product, enable coinsurance and risk layering on the Submission screens in PolicyCenter.

Procedure

  1. Apply a section type to the appropriate coverages.
    1. Edit any coverage.
    2. In Element Details, click Manage Clause Categories.
    3. Edit the appropriate clause category.
    4. In Element Details, in Section Type, copy and paste the code from PolicyCenter.
  2. Enable coinsurance and risk layering.
    1. On the Product Model screen, in the navigation pane, select the product.
    2. In Element Details, check Coinsured and Risk Layering.