Glossary

Reinsurance tower

The stack of reinsurance layers an insurer buys one above another, each starting where the layer below ends, to cover progressively larger catastrophe losses.

Also called: cat tower, catastrophe tower, reinsurance program, reinsurance layers, excess of loss layers

A reinsurance tower is the set of layers an insurer buys to protect itself against a catastrophe. Each layer has an attachment point, where it starts paying, and a limit, the most it pays. A layer written as $300 million excess of $200 million pays losses between $200 million and $500 million. The insurer keeps the first dollars, called the retention, and often a share of each layer.

Say an insurer retains the first $200 million of a hurricane and buys two layers: $300 million excess of $200 million, and $500 million excess of $500 million. A $650 million loss splits three ways. The insurer pays $200 million, the first layer pays its full $300 million, and the second layer pays the remaining $150 million. Anything above the top, $1 billion in this example, falls back on the insurer unless it has other protection.

Lower layers are hit more often and cost more per dollar of cover, while upper layers are cheaper but rarely reached. Insurers fill towers with traditional reinsurance, catastrophe bonds and, in Florida, the Florida Hurricane Catastrophe Fund. The height of a tower is normally set against the insurer's probable maximum loss. For a homeowner, a tower that tops out below a realistic big storm is a reason to check the insurer's financial strength. See reinsurance: the insurers behind your insurer for the broader picture.

Last reviewed October 10, 2026

In the index now

Related terms

Reinsurance Insurance that an insurance company buys from other companies, which reimburse part of its claim payments, especially after a large disaster. Catastrophe bond A security sold to investors that pays interest, but whose principal goes to the insurer that sponsored it if a defined disaster occurs, serving as reinsurance. Probable maximum loss A modeled estimate of how big an insurer's loss from a single severe catastrophe could be, stated at a probability such as a 1-in-100-year event. Florida Hurricane Catastrophe Fund Florida's state-run reinsurance program, set up after Hurricane Andrew, that reimburses residential insurers for part of their hurricane losses. Policyholder surplus An insurer's assets minus its liabilities under statutory accounting, the capital cushion that absorbs losses beyond its reserves and premiums.

Related guides

Catastrophe bonds and home insurance How cat bonds let investors, not just reinsurers, back hurricane and wildfire risk, who sponsors them, and what they change for homeowners and their premiums. Federal catastrophe reinsurance proposals Bills in Congress would put a federal backstop behind insurers or state programs after huge disasters. What the INSURE Act and others do, and the arguments. Reinsurance costs and your premium How the price of reinsurance reaches a homeowners rate, what happened to it in 2023 and since, and why falling reinsurance prices do not cut every bill. Reinsurance: the insurers behind your insurer How reinsurance works for home insurers: quota share vs excess of loss, retentions and towers, state backstops, and what it means for your premium and claim.

Related insurers

Security First Insurance Ormond Beach, Florida home insurer led by former state senator Locke Burt, selling HO-5, HO-3, condo, renters and landlord policies directly and through agents.