Excess of loss reinsurance provides protection once losses exceed a specified retention, allowing cedants to cap their exposure to large individual or aggregated events. It is widely used for catastrophe, liability, and specialty portfolios, where tail risks could otherwise threaten solvency or earnings stability. Structuring layers, attachments, and reinstatements requires detailed modelling of loss distributions and catastrophe scenarios, with purchasing decisions influenced by reinsurance market capacity, pricing cycles, and capital considerations.
