Excess of Loss insurance provides a business with additional cover above their primary liability policy, providing protection from major incidents that could erode their primary insurance. It is also commonly referred to as Catastrophe insurance.
XoL is commonly used when the primary insurer may not be able to provide the limit of indemnity required, either through lack of available capacity or appetite. XoL providers can ‘top-up’ the protection to ensure policyholders receive adequate protection.
Allianz Trade XoL teams are expanding in response to market demand
According to reports, the move follows the successful growth of its teams in the UK and US. The company aims to hire new talent to further strengthen its position in these regions. Allianz Trade is actively developing its XoL division by expanding into markets that demand this type of solution and investing in the operational aspects of the division.
As global economic activity slows down and insolvencies increase, Allianz Trade predicts that companies will require increased protection and support against unexpected losses in 2023.
To meet this demand, the company is committed to providing dedicated teams in these markets, with a physical presence in Germany and Asia Pacific where XoL solutions are already delivered, and the creation of new XoL teams in Spain and Brazil, thus expanding its global presence for this type of solution.
Speaking about increased industry risk and the ways insurance providers could address new demands, Aylin Somersan Coqui, CEO of Allianz Trade said recently “If I have a wish, it would be that more business leaders have a chance to experience the other side of the risk/reward coin. These exchanges make risk more business-minded and business more risk-minded.”
Excess of Loss insurance explained
XoL insurance provides protection to businesses against losses that exceed a specified threshold, known as the “attachment point” or “retention limit”. If the losses exceed this threshold, the XoL insurance kicks in to cover the remaining amount, up to the policy limit.
It is commonly used in commercial lines of insurance, such as property and casualty, liability, and trade credit insurance. It is designed to provide additional coverage beyond the primary or underlying insurance policies, acting as a form of “insurance for insurance”.
XoL insurance is also typically purchased by larger businesses with higher levels of risk exposure, as it provides coverage for catastrophic or high-severity losses that could potentially result in significant financial impacts. It allows businesses to protect their assets, revenue, and balance sheet from unexpected and large-scale losses.
Depending on the provider, XoL insurance policies are customisable and can be tailored to meet the specific needs of a business, including the attachment point, policy limits, and coverage triggers. Premiums are usually based on the level of risk exposure, historical loss experience, and other factors.
XoL insurance can also be used in combination with other risk management strategies, such as self-insurance, captive insurance, and reinsurance, to create a comprehensive risk transfer program for businesses.
It is an important tool for managing and mitigating risks beyond the coverage provided by primary insurance policies, and can offer businesses greater financial protection and peace of mind.
