What is a quota share layer in a senior care excess tower?

Senior care severity has moved faster than market capacity. Carriers that will participate in the class have reduced the limit any one of them will put up on a single account, so a tower that used to be built from three carriers in three layers is now built from eight or ten participations across the same span.

A quota share layer is the mechanism. Instead of one carrier writing $5M excess of $5M, four carriers each write twenty-five percent of that layer. Each has its own policy, its own form in principle, and its own claims department.

Payment is proportional and each participant pays only its share, so a participant that becomes insolvent or disputes coverage leaves a hole in the middle of the layer rather than at the top of the tower. Confirm whether the layer is written on a several rather than joint basis, because several liability is the norm and it means no participant covers another shortfall.

Coordination also changes. A claim that reaches a quota shared layer has multiple claims professionals with opinions and no single decision maker, which slows settlement. Ask whether one participant is designated as the lead with authority to bind the others, and ask what percentage the lead holds, because a lead with a small share has less leverage.

Each participant issues its own policy. If they do not all follow the same form, you can end up with a layer where three quarters of the limit follows the primary treatment of abuse and one quarter does not. That produces a partial recovery on the claim most likely to reach the layer.

Ask for confirmation that every participation in every layer is follow-form to the primary, and ask specifically about the abuse coverage part and the defense cost treatment. Where a participant insists on its own form, know which quarter of which layer behaves differently before you need it.

A tower with ten participations has ten renewal decisions rather than three. One participant leaving does not collapse the program but it does create a hole that has to be refilled at whatever the market charges that year, which makes the year over year cost less predictable than the headline rate change suggests.

Ask your broker for the tower on one page with every participant, its share, its layer, its attachment and its form. If that page does not exist, it is worth asking why not, because the broker who assembled the tower is the only party who can see the whole of it.