Claims & Protection Layers
How Retention Layers Are Set
In this sectionHow Retention Layers Are Set
Retention layers define how far each protection level pays before the next layer activates. They are set relative to the member’s annual Total Premium, risk profile, and the program’s overall capital structure so that Independent Account equity is put to work first while the Group Account and backup insurance via reinsurance provide orderly excess protection.
Illustrative Mathematics — $250,000 Annual Premium
Assume a qualified member with $250,000 in Total Premium. The standard Independent Account equity contribution is approximately 20 percent, or $50,000. For illustration, the per-occurrence retentions are structured as follows:
| Layer | Attachment / Exhaustion | Amount of Layer | Funding Source |
|---|---|---|---|
| A — Independent Account | $0 – $50,000 | $50,000 | Member’s equity contribution + allocated premium reserves |
| B — Group Account | $50,001 – $500,000 | $450,000 | Shared Group Account (portion of all members’ premiums + seed capital) |
| C — Reinsurance | Above $500,000 | Unlimited (subject to treaty terms) | External reinsurance purchased by the program |
Scroll the table sideways to see all columns.
In this example the Independent Account retention equals the member’s equity contribution. Larger or smaller retentions can be negotiated based on the member’s loss history, operational controls, and capital preference. The Group Account attachment point ($50,000 in the example) and the reinsurance attachment point ($500,000) are program-level decisions that balance risk sharing with capital efficiency.