A non-proportional treaty where all losses arising from one event are aggregated before meeting the retention.
A per occurrence excess of loss treaty aggregates every loss arising from a single cause before comparing the total to the retention. A windstorm damaging four thousand roofs is one occurrence, and the cedant bears the retention only once, however many policies are hit. The definition of an occurrence therefore becomes the heart of the contract, and is settled by the hours clause, which bounds the window within which losses attach to one cause. The problem it solves is accumulation: a portfolio perfectly balanced risk by risk can still be wrecked by a peril that strikes thousands of policies at once, and no per risk cover answers that, since no individual claim reaches the retention. This is the form used for catastrophe reinsurance, whose upper layers are priced by catastrophe model rather than by experience, the record being far too short for a two hundred year return period.
After windstorm Lothar in December 1999, which together with Martin cost French insurers roughly 6 billion euros over three days, several cedants found that their 72 hour clause split the sequence into two separate occurrences, and therefore two retentions instead of one. One mutual carrying a 15 million retention absorbed 30 million net. The 2000 and 2001 renewals saw the clause extended to 96 and then 168 hours on European windstorm layers.
XL par événement, Per occurrence XL, Catastrophe excess of loss, Excédent de sinistre par événement, Per event XL