Category: Reinsurance structures · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-05
Excess of loss reinsurance (XL or XOL) is the principal form of non-proportional reinsurance. The reinsurer pays losses suffered by the cedant in excess of an agreed retention, up to an agreed limit, in return for a premium calculated to reflect the expected loss cost in the layer.
Category: Reinsurance structures Also known as: XL, XOL, excess of loss Related concepts: non-proportional reinsurance, risk excess of loss, catastrophe excess of loss
The XL contract is described by reference to its retention (the amount of loss the cedant must suffer before the reinsurer responds) and its limit (the maximum amount the reinsurer will pay). A treaty of ‘£20m excess of £5m’ means the reinsurer pays losses above £5m up to a further £20m, with the cedant retaining the first £5m and any excess over £25m.
XL treaties may be structured as a single layer or as a programme of multiple layers, each with its own attachment point, limit, premium, reinstatement provisions and panel of reinsurers. Multi-layer programmes are common for high-limit cover where no single reinsurer would write the full programme.
XL contracts are documented under the Market Reform Contract. The duty of fair presentation under the Insurance Act 2015 applies. The classical ‘follow the settlements’ clause obliges the reinsurer to follow the cedant’s bona fide and businesslike settlements [1].
XL is the principal form of non-proportional reinsurance and is used across virtually every line of insurance. Premium is calculated using burning cost, exposure rating and stochastic catastrophe modelling, often combined with judgement based on market conditions. Premium is typically expressed as a percentage of the limit (rate on line) or of the subject premium income.
Reinstatement provisions govern what happens after a loss exhausts the layer: the cover may be reinstated free, on a pro rata basis or for an additional premium, depending on the contract terms. Most XL contracts allow one to three reinstatements per year, with the rate of reinstatement premium agreed in the slip.
The XL market is highly cyclical: rates rise sharply after major loss events and soften in subsequent years. Capacity for catastrophe XL is dominated by Munich Re, Swiss Re, Lloyd’s syndicates, Bermuda reinsurers and alternative capital.
An illustrative example: a UK property insurer purchases a programme of property catastrophe XL: £25m xs £25m (first layer), £50m xs £50m (second layer), £100m xs £100m (third layer). The total programme of £175m xs £25m protects against losses up to £200m from any single catastrophic event. The first layer (closest to retention) typically prices at 8–15 per cent rate on line; the top layer at 1–3 per cent.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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