What does the term aggregate refer to in a Retro Plan?

In the context of a Retro Plan, the term “aggregate” specifically refers to the maximum amount that is subject to the plan for all claims incurred during the policy term. This aggregate limit is key in determining the total liability of the insurer under a retrospective insurance plan, which adjusts the premium based on the actual loss experience over a defined period.

In practice, the aggregate limit ensures that there is a cap on the amount of claims that an insurer is responsible for, fostering financial predictability for both the insurer and the insured. It allows businesses to manage risk by understanding the maximum exposure associated with claims. Overall, this concept plays a crucial role in retrospective rating plans, where premiums can fluctuate based on losses, but the overall exposure is limited by the aggregate amount.