Working Covers

Abstract A working cover is a very standard and prevalent form of excess‐of‐loss treaty reinsurance. Working covers provide capacity and stabilization for a ceding company's financial results. A working cover provides capacity because it allows the ceding company to write higher policy limits and yet maintain a manageable risk level. Working covers enhance competition within the insurance marketplace by providing a means by which smaller insurers can compete with larger insurers. Working covers are often large enough so that many of the pricing parameters can be estimated either directly from the exposure and claims history or by a credibility weighting of that history with more general industry information.