Catastrophe Excess
The highest excess liability layer in a large program, designed to respond only to catastrophic losses that penetrate all lower layers.
What It Is
Catastrophe excess, sometimes called clash excess or catastrophe cover, is the highest layer in a large excess liability program designed to respond only to truly catastrophic losses—those so severe they exhaust all underlying primary, umbrella, and intermediate excess layers. These layers typically sit at very high attachment points ($25M, $50M, $100M, or higher) and provide large limits ($25M to $100M+).
Catastrophe excess layers are typically written by large global reinsurers and London market syndicates with the capacity and appetite for high-severity, low-frequency risk. They follow form to the lead umbrella and are priced on a rate-per-million basis that reflects the remote probability of attachment but the severity of potential payment.
These layers are common in industries with catastrophic loss potential: large-scale construction, petrochemical, transportation, manufacturing, public entities, and healthcare. A $200M liability tower might consist of a $2M primary, $5M lead umbrella, $10M first excess, $25M second excess, $50M third excess, and $108M catastrophe excess layer.
Why It Matters for Brokers
For brokers serving large commercial accounts, understanding catastrophe excess placement is essential. These layers require access to London and Bermuda markets, specialized submission presentations, and catastrophe modeling. The broker's ability to build an efficient tower with competitive catastrophe excess pricing directly impacts the client's total cost of risk and the adequacy of their protection against worst-case scenarios.
Real-World Example
A chemical manufacturer's liability tower totals $150M: $2M primary CGL, $5M lead umbrella ($18K), $10M first excess ($14K), $25M second excess ($22K), $50M third excess ($30K), $58M catastrophe excess ($32K). An explosion causes $95M in third-party damages. Each layer responds sequentially: primary $2M, umbrella $5M, first excess $10M, second excess $25M, third excess $50M, catastrophe excess $3M. Without the catastrophe excess layer, the company would owe $3M of the $95M loss. The $32K annual catastrophe excess premium prevented a $3M out-of-pocket loss.
Common Mistakes
- 1Not placing catastrophe excess for large industrial or transportation accounts, assuming lower layers provide sufficient protection for worst-case scenarios.
- 2Failing to verify that the catastrophe excess follows the lead umbrella's terms—if it adds exclusions, the highest-severity claims may be the ones excluded.
- 3Not updating catastrophe excess limits as the business grows—a program designed for $50M in revenue may be inadequate when revenue reaches $150M.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker maps the complete liability tower including catastrophe excess layers and verifies seamless attachment points throughout. The system tracks the total limit adequacy against industry benchmarks and revenue growth, recommending tower increases when the insured's exposure outgrows the program. The platform also verifies that catastrophe excess terms follow the lead umbrella without additional exclusions.