Layer limit

The layer limit is the amount of cover a reinsurance layer provides above its attachment point, and the second half of the standard notation: a layer described as ten in excess of five million has a five million attachment and a ten million limit, hence an exhaustion point of fifteen million. It determines three things at once: the maximum recoverable on one event, the denominator of rate on line and therefore how price reads, and the capacity consumed when a loss erodes the layer. The problem it solves is structuring: rather than buying one block of cover from the retention to the top of the program, the cedant stacks layers of differing limits, which lets each be placed with the reinsurers pricing it best and the number of reinstatements be tuned by height. A badly sized limit is paid for twice: too short, it leaves a gap between two layers; too long, it buys capacity the catastrophe model never reaches.

A 2026 French catastrophe program stacks as follows: 20 million xs 10, then 50 xs 30, then 120 xs 80, topping out at 200 million. The second layer's limit is 50 million for a 3.5 million premium, a rate on line of 7 percent. The third, with a 120 million limit, costs 2.4 million, or 2 percent. The same euro of premium therefore buys five times more limit at the top of the program than in the middle.

Portée, Limit, Capacité de tranche, Montant de garantie