What does "reinstatement" typically refer to in excess of loss reinsurance?

The term "reinstatement" in the context of excess of loss reinsurance specifically refers to the agreement to restore the capacity of the layers of cover that have been exhausted by claims during the policy period. When a loss occurs, and the limit of an excess of loss reinsurance policy is reached, reinstatement allows the insurer to use that layer of coverage again after it has been depleted.

This concept is crucial in reinsurance as it ensures that the insurer is still protected against further losses even after significant claims have already been paid out. Reinstatement provisions typically include the conditions under which the layers can be restored, how many reinstatements are allowed, and any additional premiums associated with reinstating that coverage.

The other options, while related to reinsurance and underwriting processes, do not accurately describe the specific meaning of "reinstatement" in this context. The calculation of premium adjustments, methods for loss estimation, and drafting of new policies all represent different functions or processes within the broader scope of insurance but do not encapsulate the unique concept of reinstatement as it is understood in excess of loss reinsurance.