Insurance tower (layered program)

An insurance tower, or layered program, splits a large cover into stacked layers, each carried by one or more insurers, to reach a limit none of them would write alone. At the bottom, the primary insurer pays first, up to the top of its layer; above it sit the excess insurers, each paying only once the layer below is exhausted. Each layer is written as its limit over its attachment point, "25M xs 25M" for 25 million in excess of the first 25 million, and a layer shared by several insurers is split into percentages. Excess layers usually follow the primary wording on a following form basis, with any exclusions of their own. The risk is spread across several balance sheets, and each layer is marketed separately, with the higher, less exposed layers priced lower. A tower often gets confused with coinsurance. In coinsurance, several insurers share the same risk from the first dollar, each for its percentage; in a tower they respond one after another. Reinsurance stacks the same way in excess of loss, but it protects the insurer, not the insured. Towers are common for large corporate risks, in liability, property, D&O and, more and more, cyber, where the limits large companies want are far beyond what any one insurer will take. The hard part is keeping the tower consistent. Terms can vary from layer to layer, a drop-down clause can bring an excess layer down when the year's claims have exhausted the layer beneath it, and a major loss tests the whole structure, right up to the layers nobody expected to touch.