Schedule Discussion

Claims & Protection Layers

Illustrative Claims Examples

In this sectionIllustrative Claims Examples

The following examples use the $250,000 premium / $50,000 Independent Account retention structure shown on the preceding page. They are illustrative only and not guarantees of actual claim outcomes or layer sizes.

Claim 1 of 3 — Fully within Independent Account

Claim Amount: $35,000

  1. Independent Account — pays entire $35,000
  2. Group Account — not triggered
  3. Reinsurance — not triggered

The claim is absorbed entirely by the member’s own Independent Account. No shared program capital is used. Remaining equity continues to earn investment income.

Claim 2 of 3 — Reaches the Group Account

Claim Amount: $180,000

  1. Independent Account — pays first $50,000
  2. Group Account — pays remaining $130,000
  3. Reinsurance — not triggered

Independent Account is exhausted for this occurrence. The shared Group Account covers the excess. Other members’ Independent Accounts remain untouched.

Claim 3 of 3 — Reaches Reinsurance

Claim Amount: $1,250,000

  1. Independent Account — pays first $50,000
  2. Group Account — pays next $450,000
  3. Reinsurance — pays remaining $750,000

All three layers respond. Independent Account and Group Account are capped at their retentions; external backup insurance via reinsurance absorbs the catastrophic portion and protects the mutual’s long-term capital.

In every case the Policy Issuer remains the named insurer on the admitted policy and coordinates payment to the third-party claimant. Behind that paper, the economic cost is allocated strictly according to the waterfall above.