Retained Limit
The total amount of underlying insurance plus any SIR that must be exhausted before an umbrella or excess policy begins to pay.
What It Is
The retained limit is the total amount of insurance the insured retains—either through underlying policies or self-insured retention—before an umbrella or excess policy is triggered. It represents the insured's total financial commitment before the excess layer responds. The retained limit includes all primary policy limits plus any applicable SIR.
For example, if an insured has a $1M CGL, $1M auto liability, $500K employers liability, and a $10,000 SIR on the umbrella, the retained limit varies by claim type: $1M for a general liability claim (CGL limit), $1M for an auto claim (auto limit), $500K for a workplace injury claim (EL limit), or $10,000 for a claim type covered by the umbrella but not by any underlying policy (SIR).
The umbrella or excess policy schedules the required retained limits for each type of underlying coverage. If the insured reduces an underlying limit below the scheduled retained limit, the umbrella carrier may refuse to pay the difference between the actual underlying limit and the scheduled retained limit, creating an uninsured gap.
Why It Matters for Brokers
Brokers must ensure that underlying limits match the retained limits scheduled on the umbrella or excess policy. Any reduction in underlying coverage—whether intentional or through a carrier's mid-term change—can create a gap between the underlying limit and the umbrella's attachment point. This gap is uninsured and becomes the insured's responsibility, often discovered only when a large claim occurs.
Real-World Example
An umbrella policy schedules a $1M retained limit for CGL claims. At renewal, the CGL carrier reduces the per-occurrence limit to $500,000 due to adverse claims experience. The broker does not update the umbrella carrier. A $2.5M liability claim occurs. The CGL pays $500,000. The umbrella carrier points to the scheduled $1M retained limit and refuses to pay until the $1M threshold is met. The insured absorbs a $500,000 gap between the $500K CGL limit and the $1M umbrella attachment point. The umbrella then pays $1.5M of the remaining $2M.
Common Mistakes
- 1Not updating the umbrella carrier when underlying policy limits change, creating a gap between the actual underlying limit and the scheduled retained limit.
- 2Confusing the retained limit with the SIR—the retained limit is the full amount of underlying coverage required, while the SIR applies only to drop-down situations.
- 3Assuming the umbrella will automatically adjust its attachment point to match reduced underlying limits—it follows the scheduled retained limit, not the actual underlying limit.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker cross-references the umbrella's scheduled retained limits against actual underlying policy limits for every account. If any underlying limit is lower than the scheduled retained limit, the system generates a critical gap alert. The platform also tracks underlying policy changes and automatically flags when a mid-term limit reduction affects the umbrella's attachment point.