Sir please explain the difference between Excess of loss cover on prevent basis and Excess of loss cover on non-prevent basis.

1 answer

Ravi Staff August 7, 2017

in case of excess loss on prevent basis—- stop loss limit is for each category of risk and its corresponding loss, that means say limit of 100 crore for loss due to accident, 50 crore for loss due to theft, 25 crore for loss due to earthquake and so on so losses are segregated on the basis of nature, we have stop loss limit for each category and if loss exceeds limit re-insurer will pay for it.   
on the other hand in case of excess loss on non-prevent losses are summed up, there is one common stop loss limit, in excess of which is shared by re-insurer.
if you want more explanation please reply back
Text
Excess of loss cover on prevent basis: In this type of cover, in case as a result of one event several risks are effected, the loss under each risk is arrived at separately and the underlying limit is applied to each risk to determine the liability of the insurer. This is also known as working excess of loss cover.
 
Excess of loss cover on non-prevent basis: In this type of cover, losses resulting from one event are considered together and aggregate amount of loss is determined and one loss underlying limit is deducted from the aggregate amount of the loss to determine the liability of the excess of loss reinsurer. This type of cover provides protection to an insurer against the numerous losses caused by one or the same event such as cyclone, earthquake, etc.

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