Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. What kind of year does a stop loss protect that no other structure protects?
A bad year WITHOUT any serious loss: repeated hail, motor experience drifting by a few points, an ordinary epidemic. None of that clears a per-risk or per-event priority, and all of it ruins an account
A stop loss is the only treaty that looks at the result rather than at losses, which is why it catches the accumulation of frequency the other structures let through by construction. The answer on a single event describes what the height of a catastrophe program handles. The one on exhausted reinstatements describes horizontal exhaustion, which calls for aggregate cover and which a stop loss would indeed catch, but which remains a case of identifiable losses. The one on reserve development describes reserve risk, covered by retrospective reinsurance rather than by an annual stop loss.
Glossary entry · stop-loss2. A stop loss places with difficulty, and the difficulty is not commercial. What is it?
By covering the result, it covers chance and conduct indistinguishably: inadequate pricing, unmanaged growth, loosened underwriting. The reinsurer cannot separate them from outside, and the cedant separates them perfectly
Moral hazard is not a theoretical risk here, it is the central subject of the negotiation, and it explains the shape of the contracts that do get placed. The answer on capacity describes a constraint settled by sharing. The one on an unbounded base is factually wrong, the cap in points bounding the commitment whatever happens. The one on history names a real pricing difficulty, common to many treaties, and does not explain why this one in particular meets a refusal in principle.
Glossary entry · net-loss-ratio3. Three devices recur in almost every stop loss placement. What do they have in common?
They make the contract uncomfortable, and deliberately: a threshold set well above breakeven, a cedant participation above the threshold, a cap in points. Each keeps an interest in limiting the burden
These three answers to moral hazard are recognizable by the fact that they leave part of a bad year with the party who can act on it: the cover never responds to a merely disappointing year, and it never pays everything. The answer on premium describes a real and secondary effect of these devices. The one on simplifying the calculation confuses an annual structure with an administrative convenience. The one on prudential requirements names a neighboring subject, recognition of risk transfer, which concerns the existence of sufficient hazard rather than the cedant's interest in managing well.
Glossary entry · point-attachement4. The module says a stop loss is read with its exclusions. Which is most often decisive, and why?
The one removing the share of drift attributable to a CHANGE OF SCOPE, a new line, an acquisition, a change of underwriting policy: precisely the case where the ratio moves with no role for chance
This exclusion follows directly from the treaty's central subject: it removes what belongs to management conduct rather than to chance, which is why it decides whole files. Policies also frequently exclude perils already covered elsewhere, so as not to pay twice. The answer excluding large losses gets it backwards: a stop loss includes them in the annual burden, and its point is precisely not to choose. The ones on post-closing reserves and long tail lines describe settlement difficulties that the calculation period handles, not substantive exclusions.
Glossary entry · clause-exclusion5. A cedant buys a stop loss of twenty-five points in excess of eighty-two percent. What does it not know when signing, and why is that unusual?
The base: the threshold is expressed as a percentage of the year's earned premiums, which are not known at purchase. Translating into euros requires a figure that does not yet exist
That is already a notable difference from an ordinary layer, whose priority and limit are known amounts: here the notation looks like a layer's and the unit changes. The recalculation is made on the observed base, not on the estimate used to buy. The answer on reinstatements imports a mechanism from per-event layers. The one on the premium rate describes an adjustable premium, which exists in some treaties and is not what the notation leaves unknown. The one on the inception date names a real convention, known at signing.
Glossary entry · reassurance-traite