Attachment probability

Attachment probability is the chance, over one year, that an event reaches the threshold at which a layer begins to pay. Together with exhaustion probability and expected loss, it forms the triptych every insurance-linked securities prospectus publishes and investors compare across issues. The problem it solves is legibility of risk for an investor who is not an insurer: it cannot read a treaty, but it can compare a probability of default with that of a rated bond, and that is exactly what this figure allows. It is always read alongside expected loss, because the two say different things: a thin layer with a high attachment probability will be hit often but lose little each time, while a wide high layer will rarely be hit but lose everything when it is. Its limit is the model producing it, and two modelers can publish probabilities differing by half on the same risk.

A 2026 cat bond shows an attachment probability of 1.85 percent, an exhaustion probability of 0.74 percent and an expected loss of 1.21 percent, for a spread of 5.8 percent. A second note from the same sponsor on a higher layer shows 0.62 percent attachment and 0.41 percent expected loss, for a spread of 3.1 percent: the multiple rises from 4.8 to 7.6 moving up the tower.

Attachment probability, Probabilité de première perte, Probability of first dollar loss, Probabilité d'atteinte