What is Retention Limit?
Retention Limit The maximum amount of risk or loss an insurance company or reinsurer retains on a policy or portfolio before transferring the excess to reinsurance; a key parameter in underwriting and reinsurance treaties.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Retention Limit” Used in Practice?
The reinsurer will only accept claims above the retention limit agreed upon in the reinsurance contract.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Retention Limit?
The maximum amount of risk or loss an insurance company or reinsurer retains on a policy or portfolio before transferring the excess to reinsurance; a key parameter in underwriting and reinsurance treaties.
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