Umbrella Drop-Down

Calculate umbrella recovery with an optional underlying drop-down.

Description

Umbrella recovery may include excess loss and, when allowed, a gap in underlying recovery.

Umbrella recovery may include excess loss and, when allowed, a gap in underlying recovery. This model exposes those portions separately.^[1]

Calculate umbrella recovery with an optional underlying drop-down.

When to use Umbrella Drop-Down

Use this tool to calculate umbrella recovery with an optional underlying drop-down.

Prepare the supplied policy terms, dates, assumptions or recorded indicators requested. Keep monetary amounts on one currency basis and select the applicable thresholds separately.

How to use Umbrella Drop-Down and understand its results

Prepare the supplied policy terms, dates, assumptions or recorded indicators requested. Keep monetary amounts on one currency basis and select the applicable thresholds separately.
Enter coveredLoss, underlyingLimit, underlyingRecovery, umbrellaLimit, dropDownAllowed using the field table and calculation rules, then run the tool.
Read underlyingGap, umbrellaRecovery, uninsuredLoss. The explanation below defines the units, signs, ordering and any flags or placeholder values.
If the tool reports an input issue, correct the values and run it again. Apply the stated assumptions when interpreting a successfully returned result.

Input field	Meaning	Value type; see rules below	Requirement
coveredLoss	Covered loss	number; minimum: 0	Required
underlyingLimit	Underlying policy limit	number; minimum: 0	Required
underlyingRecovery	Underlying recovery	number; minimum: 0	Required
umbrellaLimit	Umbrella limit	number; minimum: 0	Required
dropDownAllowed	Drop-down coverage allowed	boolean	Required

Enter nonnegative loss, underlying limit/recovery and umbrella limit, plus drop-down flag. Add excess and optionally the gap, cap at umbrella limit and return gap, recovery and clipped residual loss.

gap=max(0,min(loss,underlyingLimit)−underlyingRecovery); excess=max(0,loss−underlyingLimit)

Units, indexing, boundary conditions and exceptional cases are defined in the calculation rules above.

Output field	Meaning	Value type
underlyingGap	Unpaid amount below underlying limit	number; minimum: 0
umbrellaRecovery	Umbrella recovery	number; minimum: 0
uninsuredLoss	Remaining uninsured loss	number; minimum: 0

json

{
  "input": {
    "coveredLoss": 1000,
    "underlyingLimit": 500,
    "underlyingRecovery": 300,
    "umbrellaLimit": 600,
    "dropDownAllowed": true
  },
  "output": {
    "underlyingGap": 200,
    "umbrellaRecovery": 600,
    "uninsuredLoss": 100
  }
}

Limitations and assumptions

Underlying recovery is not constrained to the limit or loss. The flag assumes a policy permission; no policy interpretation, insurer solvency or actual claim decision is supplied.

Numeric inputs must be finite. Follow the calculation-specific rules for overflow, underflow and exceptional cases. Missing required fields, extra fields, wrong value types and violations of the calculation rules are input errors.

Alternative or Complementary methods

Use Umbrella Underlying Limit Check: Compare underlying policy limits with caller-supplied umbrella requirements. For a complementary task, use Retrocession Waterfall: Apply retrocession attachments and limits to a gross ceded loss.

References

Umbrella Drop-Down — tool.io

Similar or alternative tools

Umbrella Underlying Limit Check
Compare underlying policy limits with caller-supplied umbrella requirements.
Retrocession Waterfall
Apply retrocession attachments and limits to a gross ceded loss.