Glossary of Reinsurance Terms

Interlocking Clause

A provision in a reinsurance agreement designed to allocate loss from a single occurrence between two or more reinsurance agreements.  The provision is intended to be used when the company purchases its excess of loss reinsurance on an “underwriting year” or “risks attaching” basis.  The provision allows the reinsured to apportion its retention across two or more reinsurance agreement periods, i.e., when one loss affects policies assigned to different reinsurance periods, so that the company will have one retention and one recovery for the loss involving the two reinsurance periods.