Attachment point

The attachment point is the loss threshold from which a non-proportional reinsurance layer begins to take on losses. Below this point, losses remain entirely with the cedant under its retention or priority; above it, and up to the layer's upper limit, they fall to the reinsurer. The attachment point is therefore one of the two parameters that define a layer, along with its limit. Setting it is a central trade-off in structuring a program, because a low attachment point transfers more risk to the reinsurer but costs more in premium, whereas a high attachment point reduces the cost but exposes the cedant more. The choice depends on the cedant's risk appetite, its capital capacity and the line's volatility. The higher a layer attaches, the lower its rate on line and the more its pricing moves away from burning cost to rest on modeling. In cyber, setting the attachment point is made delicate by the uncertainty over the severity of accumulation events, which can push a loss well beyond the level anticipated when the program was structured.

By raising the attachment point of its cover from 5 to 10 million, a cedant reduces its reinsurance premium but now retains all losses up to 10 million.

point d'attachement, priorité, attachment point, rétention