Repeated consumption of the same low layer by several successive events, until reinstatements run out.
Horizontal exhaustion occurs when the same layer, usually the lowest, is hit several times in the year by separate events until its reinstatements are used up. The program then has no first line left, and the cedant carries every subsequent event in net up to the attachment of the layer above, which remains intact and fully paid for. It is the most common and least anticipated failure mode, because sizing attention almost always goes to the height of the program. The problem it points to is secondary perils, hail, flood, severe convective storm and wildfire, whose signature is a repetition of mid-sized events rather than one extreme. The answers are threefold: buy more reinstatements, lower the bottom layer's attachment, or add an aggregate cover that accumulates events instead of treating them one by one. Only the third genuinely answers frequency; the first two merely move the threshold.
In the United States, 2023 recorded more than twenty billion-dollar severe convective storm events, totaling roughly 60 billion dollars of insured losses, with no major hurricane landfall at all. Midwest insurers whose bottom layer carried a single reinstatement used it up by June and absorbed the summer hail episodes in net, while their upper layers, paid for in full, were never touched once.
Horizontal exhaustion, Consommation horizontale, Épuisement par fréquence