Primary layer

The primary layer is the tranche of an insurance program that responds as soon as the insured's deductible or retention is exceeded. It holds a special place in the tower. It is the most exposed to frequency, since almost every loss reaches it, which makes its premium the highest relative to its limit. It generally carries claims handling and the direction of the insured's defense, with the associated costs. And its policy serves as the reference for the excess layers, which follow its terms. The primary insurer is therefore often the real lead of the program, even when it carries only a small share of the total limit. For the underwriter, the primary layer is priced on the insured's experience, since losses there are numerous, whereas high layers are priced on exposure and scenarios, for lack of history. Its profitability depends on the quality of claims handling and control of defense costs, which the upper layers watch closely, because a poorly managed primary layer passes upward losses that should not have reached them.