Annual aggregate deductible

An annual aggregate deductible is the cumulative loss threshold a cedant must reach before an aggregate cover responds. It does for the year what a retention does for a single event: while the sum of qualifying losses stays below it, the reinsurer owes nothing, and the first euro paid is paid on breach. It is frequently combined with a per loss qualifying deductible, which decides which losses enter the accumulation, and the two must not be confused: one filters, the other triggers. The problem it solves is the sharing of frequency: a cover paying from the first event would carry a premium close to expected losses, with no real risk transfer. Setting the deductible above normal experience leaves the predictable part with the cedant and transfers only the deviation, which is what efficient transfer means. Its level is calibrated on the distribution of annual losses, typically between the median and the eightieth percentile.

A cedant whose annual windstorm burden averages 32 million with an 18 million standard deviation sets its aggregate deductible at 55 million for 2026, roughly the eightieth percentile. The quoted premium falls to 4.1 million, against 9.3 million for the same structure attaching at 35 million. The underwriting committee takes the higher threshold: the 5.2 million difference exceeds the expected loss transferred between the two attachment levels.

AAD, Franchise agrégée, Annual aggregate deductible, Seuil agrégé