Published October 2026.
Direct Answer: On a treaty slip, “€5M xs €5M” means the reinsurer will pay up to €5 million of any covered loss that exceeds €5 million. The first €5 million is the layer’s limit, the second €5 million is the attachment point, which is also the cedent’s retention, and the layer’s exhaustion point is their sum, €10 million. One short line of notation therefore tells you who pays, how much, and exactly where the next layer begins.
Reading the Notation on a Treaty Slip
Excess-of-loss reinsurance, often shortened to XoL, is one of the three main treaty structures used to move large-loss risk off a cedent’s balance sheet, alongside quota share and aggregate arrangements. Where a quota share divides every loss proportionally, excess of loss is purely non-proportional: the reinsurer pays nothing until a loss is large enough to reach the layer, and then pays only within the layer’s band.
The anatomy of “X xs Y”
Every excess-of-loss layer is described by two numbers. The number after “xs” is the attachment point: the loss threshold at which the reinsurer begins to respond. The number before “xs” is the limit: the maximum the reinsurer will pay on any one loss once that threshold is crossed. Their sum is the exhaustion point: the total loss size at which the layer is fully used up.
So “$5M xs $5M” reads as: losses up to $5 million are the cedent’s alone; the next $5 million, from $5 million to $10 million, belongs to the reinsurer; and any loss above $10 million exhausts this layer and moves on to whatever sits above it. The “xs” is shorthand for “in excess of,” and the structure is sometimes called a working layer when it sits close to expected loss levels, or a catastrophe layer when it attaches far above them.
Worked example: a $10 million loss against a “$5M xs $5M” layer
Take a property treaty with a single layer of $5M xs $5M, and assume a fire loss settles at exactly $10 million. Walk the arithmetic from the ground up:
- Cedent’s retention: the first $5 million, from $0 to the $5 million attachment point, stays with the cedent.
- Layer response: the loss above the attachment point is $10M − $5M = $5 million, which fits entirely inside the $5 million limit.
- Reinsurer’s payment: $5 million. Cedent’s net retained loss: $5 million.
Now suppose the same layer faces a $12 million loss. The reinsurer still pays only its $5 million limit, because the layer is exhausted at $10 million. The cedent absorbs $5 million below the attachment point plus $2 million above the exhaustion point, for a $7 million retained loss. And a $4 million loss never reaches the layer at all: the reinsurer pays zero, and the cedent keeps the full $4 million.
Attachment Point, Retention, and Exhaustion Point
Three terms get used constantly on slips and in placement conversations, and two of them describe the same boundary from opposite sides of the table. Getting them straight is the difference between understanding a program and misreading it by the size of the retention.
Attachment point versus retention
The attachment point and the retention usually describe the same dollar threshold, viewed from different seats. From the reinsurer’s side, $5 million is the point where its liability attaches, so it is called the attachment point. From the cedent’s side, $5 million is the amount of each loss it keeps before help arrives, so it is called the retention. On most slips the two are identical: “$5M xs $5M” gives the reinsurer an attachment point of $5 million and the cedent a retention of $5 million on each covered loss.
The distinction matters when retentions are expressed differently from attachments. A cedent might describe a “$5 million per-occurrence retention” while the slip shows the layer attaching at $5 million per occurrence: same boundary, same meaning. Confusion creeps in with features like franchise deductibles that apply inside the cedent’s own policies, which are separate mechanics from the treaty’s attachment point. When in doubt, ask: at what loss size does the first dollar of reinsurance respond.
The exhaustion point, and why it anchors the next layer
The exhaustion point is the attachment point plus the limit: for “$5M xs $5M,” exhaustion sits at $10 million. In a single-layer placement it marks where the cedent becomes its own reinsurer again: any loss above $10 million is the cedent’s problem unless a higher layer has been bought. Brokers watch exhaustion points at renewal, because a cedent that has grown its line sizes may find last year’s exhaustion point now sits below its largest plausible loss. For background on how treaty structures fit together, the parent guide to reinsurance treaty structures walks through quota share, excess of loss, and aggregate covers side by side.
How Layers Stack into a Program Tower
Few cedents buy a single layer. They buy a program tower: excess-of-loss layers stacked so that the exhaustion point of one layer is the attachment point of the next, giving the cedent continuous cover from its chosen retention to the top of the program.
Worked example: a three-layer tower
Consider a regional property carrier that wants $35 million of cover above a $5 million retention. Its broker builds this tower:
- Layer 1: $5M xs $5M, covering losses from $5 million to $10 million.
- Layer 2: $10M xs $10M, covering losses from $10 million to $20 million.
- Layer 3: $20M xs $20M, covering losses from $20 million to $40 million.
Exhaustion for the whole program sits at $40 million: $5M retention + $5M + $10M + $20M of reinsurance. Three loss sizes through the tower:
- $25 million loss: the cedent keeps $5 million. Layer 1 pays its full $5 million limit, Layer 2 pays its full $10 million limit, and Layer 3 pays $5 million of its $20 million limit. Reinsurers pay $20 million in total; the cedent nets $5 million.
- $40 million loss: every layer is exhausted. The cedent retains $5 million, reinsurers pay $35 million, and the program is fully consumed for that loss.
- $50 million loss: the tower exhausts at $40 million, so the cedent retains $5 million below the attachment plus $10 million above the tower, a $15 million net loss. The remaining $10 million is why cedents model accumulation and probable maximum loss before deciding where the tower ends.
Reading the tower top to bottom
On a slip the layers are usually listed from the ground up, each one naming its limit, its attachment, and the reinsurers participating in it. The running total of attachment plus limit at each step is worth checking by hand, because a typo that sets Layer 2’s attachment at $12 million instead of $10 million opens a $2 million gap the cedent did not agree to carry. The test of a clean tower is that each layer’s attachment equals the exhaustion point of the layer beneath it, with no gaps and no overlaps.
Per-Risk, Per-Occurrence, and Aggregate Excess of Loss
The words after the numbers on a slip change what “a loss” means. An attachment of $5 million behaves very differently depending on whether it applies to one risk, one occurrence, or the year’s aggregate results.
Per-risk XoL
A per-risk excess-of-loss treaty applies its attachment and limit to each individual insured risk, meaning each policy or each location. “$5M xs $5M per risk” on a property treaty responds when a single building’s loss exceeds $5 million. If a windstorm damages fifty insured buildings at $2 million each, the $100 million event total never triggers a per-risk layer, because no single risk crossed the attachment.
Per-occurrence XoL
A per-occurrence excess-of-loss treaty applies its attachment and limit to each occurrence, meaning each event, however many risks it touches. “$10M xs $10M per occurrence” on a catastrophe treaty responds to the aggregate of all losses from one hurricane or one earthquake once the event total passes $10 million. The definition of an occurrence, including the hours clause that groups related losses into a single event, is one of the most negotiated parts of the slip, and the complete guide to reinsurance treaties covers the clauses around the numbers.
Aggregate XoL, often called stop loss
An aggregate excess-of-loss treaty applies its attachment and limit to the cedent’s accumulated losses over the treaty year, rather than to any single risk or event. “$15M xs $25M aggregate” means the reinsurer pays up to $15 million of the cedent’s total annual losses once those losses pass $25 million in aggregate. This is the cover that protects a bad year rather than a bad event: a string of mid-size losses that never trouble the per-occurrence layers can still climb past an aggregate attachment.
Placement Order and Co-Participation
So far the arithmetic has assumed each layer is fully placed with the reinsurance market. In practice, layers are subscribed by panels of reinsurers, and the cedent sometimes keeps a slice of the layer itself. Both mechanics show up on the slip, and both change who pays what when a loss arrives.
Placement order: who signs the slip first
Placement follows a subscription order. The broker offers the layer to a lead reinsurer, which sets the price and terms; following markets then subscribe for their shares at the lead’s terms. The slip records each subscriber’s line size, its percentage of the layer. A layer that is only 80 percent subscribed leaves 20 percent of every covered loss unreinsured unless the cedent fills it through co-participation.
Worked example: 80 percent placed, 20 percent co-participation
Take the familiar $5M xs $5M layer, but the broker places only 80 percent of it in the market. The cedent retains a 20 percent co-participation, keeping one-fifth of the layer’s risk alongside its retention. Now run the $10 million loss through again:
- Cedent’s retention: $5 million, unchanged, from $0 to the attachment point.
- Layer response: $5 million, the full limit, since the loss reaches the $10 million exhaustion point.
- Market reinsurers pay: 80 percent of $5 million = $4 million.
- Cedent’s co-participation: 20 percent of $5 million = $1 million.
- Cedent’s total net retained loss: $5 million retention + $1 million co-participation = $6 million.
Co-participation is not a failure of placement; it is often deliberate. Keeping a slice of the layer signals to the market that the cedent has skin in the game, which can improve pricing and secure a lead’s signature. The slip shows the co-participation explicitly, and the junior reader’s job is to add it back into the cedent’s net position before reporting what a loss really costs the company.
Placement dynamics shift with market conditions. When capacity is tight at the January renewal, lower layers may go out with larger co-participations or higher attachments, which is why placement strategy is usually read alongside a view of the global reinsurance market at the January renewal. And for readers still building the foundations, the guide to reinsurance fundamentals explains how these treaty mechanics connect to the basic job of transferring risk.
Reading a Slip in Practice
Work a real excess-of-loss slip in this order. First, find the attachment point and limit of each layer and compute every exhaustion point by hand, checking that each layer’s attachment equals the exhaustion of the one below. Second, confirm what the attachment applies to: per risk, per occurrence, or aggregate. Third, read the subscription panel for line sizes and any co-participation, and restate the cedent’s true net retention including those slices. Done in that order, the notation stops being jargon and becomes a ledger: who pays, how much, and from what loss size onward.
Frequently Asked Questions
What does “5M xs 5M” mean on a treaty slip?
“5M xs 5M” means the reinsurer pays up to 5 million of any covered loss in excess of 5 million. The second number is the attachment point, which the cedent retains, and the layer is exhausted when the total loss reaches 10 million.
What is the difference between an attachment point and a retention?
They describe the same dollar threshold from opposite sides of the table. The attachment point is the reinsurer’s term for the loss size where its liability begins, while the retention is the cedent’s term for what it keeps. On most slips both are the same number.
How do excess-of-loss layers stack into a program tower?
Layers stack so that each layer’s attachment point equals the exhaustion point of the layer below it, giving continuous cover from the cedent’s retention to the top of the program. In a tower of $5M xs $5M, $10M xs $10M, and $20M xs $20M, one occurrence can draw on all three layers, and the program exhausts at $40 million.
What is the difference between per-risk, per-occurrence, and aggregate excess of loss?
Per-risk XoL applies the attachment and limit to each individual insured risk, per-occurrence XoL applies them to each event across all affected risks, and aggregate XoL, also called stop loss, applies them to the cedent’s total losses over the treaty year.
What does exhaustion mean for the cedent?
Exhaustion means a layer’s limit has been fully used on a loss, so any further loss amount falls back on the cedent or on a higher layer. For a “5M xs 5M” layer, exhaustion arrives at a $10 million loss.
Where do reinstatements fit into excess-of-loss layers?
A reinstatement restores a layer’s limit after it has been partly or fully exhausted by a loss, so the cedent is not left uncovered for a second event in the same treaty year. Reinstatements are usually limited in number and carry an additional premium.