What type of reinsurance covers losses exceeding a specified amount?

The correct answer is excess reinsurance. This type of reinsurance is structured to cover losses that exceed a predetermined threshold, known as the retention limit. Essentially, the primary insurer is responsible for covering losses up to this specified amount, and any losses that surpass this limit are then covered by the excess reinsurer. This provides financial protection for the insurer against large or catastrophic claims, allowing them to manage risk more effectively and maintain solvency.

Understanding this concept is critical for both insurers and reinsurers, as it aids in structuring agreements and managing overall risk exposure in the insurance industry. The focus of excess reinsurance on losses above a certain point makes it an attractive option for insurers looking to safeguard against high loss events without transferring the entirety of their risk.