Bikini Deductible Explained

Bikini Deductible Explained

A “bikini deductible,” is a self-insured layer, separating the primary layer of risk—whether insured, self-insured, or funded in a captive—from the layer immediately excess of the primary. A bikini deductible was first used in health insurance, inserting a deductible (a real deductible, not a self-insured retention (SIR)) between a first dollar insured health plan and major medical coverage, which is excess of the primary health insurance policy. The structure resembles a bikini because there’s defined protection on the bottom and on the top but nothing in the middle.

Bikini deductibles migrated from health insurance to property and casualty applications when risk managers, brokers, and creative excess insurance underwriters were looking for more sophisticated methods of allocating and funding risk. Typically, the bikini deductible layer is unfunded. It’s used to lower the cost of (or provide access to) excess or umbrella insurance, while relieving the insured from the requirement to fund for expected losses. A bikini deductible is also often used in structured insurance arrangements. Bikini deductible can be designed to cover non-aggregated per occurrence limits or a combination of per occurrence and aggregate limits. A typical bikini deductible will include per occurrence limits perhaps subject to an annual aggregate, depending on the risk and the excess insurance pricing.

To learn more about how a bikini deductible works, contact ALIGNED.

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ALIGNED specializes in delivering insurance and risk management solutions exclusively to Canadian businesses. Through our 18 points of differentiation and expertise, we deliver unmatched value to our growing portfolio of clients from all industries that range from small to large organizations. We offer all of the following management liability products:

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