# 19. Large risks, insurance programmes and reinsurance

URL: https://insurancelawestonia.ee/insurance-law-cpd/large-risks-programmes-and-reinsurance/
Author: Dr Olavi-Jüri Luik, Partner, Head of Insurance Law, attorney at law (Advokaadibüroo WIDEN OÜ)
Last updated: 2026-11-11

> CPD module 19: the definition of large risks under VÕS § 427, co-insurance versus reinsurance and reading the limits of a layered programme.

Module 19 of 20 · Theme: Cross-border and emerging issues · Level: Advanced · Suggested study time: 90 minutes 

**In short.** This module covers the legal definition of large risks, the difference between co-insurance and reinsurance, and reading the limits of a layered insurance programme.

## Learning outcomes

After completing this module you will be able to:

- check the definition of a large risk;
- distinguish co-insurance from reinsurance;
- read the limits of a layered programme.

## Key points

### A large risk is a legal concept

The semi-mandatory provisions protecting the policyholder under VÕS § 427(1) do not apply, among others, to reinsurance, insurance of railway rolling stock, aircraft and ships, cargo insurance and credit and suretyship insurance of business or professional risks (§ 427(2)). For the classes in KindlTS § 12(1) points 3, 8, 9, 10, 13 and 16, the exception applies where the policyholder meets at least two criteria: balance sheet total above EUR 6,600,000, net turnover above EUR 13,600,000, an average of at least 250 employees (§ 427(3)). A large loss does not make the risk large.

### Co-insurance and reinsurance

In co-insurance the same insurance is divided between several insurers and each pays only in proportion to its share (VÕS § 484). Reinsurance is a separate contract between the insurer and the reinsurer; the original policyholder has no direct claim against the reinsurer unless a separate agreement provides for it, for example a cut-through clause.

### The tower of limits

Distinguish the per-occurrence limit, the annual aggregate, sub-limits, attachment of layers, the treatment of defence costs, aggregation of related claims and reinstatement of limits. EUR 5 million plus EUR 5 million does not automatically mean EUR 10 million for every loss.

### Groups

An economic group link does not prove that every company is insured; the named insureds and the definition of subsidiary must be checked.

## Read before the quiz

Articles on this site:

- [Large risks under Estonian insurance law: VÕS § 427 and Rome I](https://insurancelawestonia.ee/estonian-insurance-contract-law/large-risks)
- [Reinsurance law in Estonia: a guide for cedants and reinsurers](https://insurancelawestonia.ee/guides/reinsurance-estonia)
- [Under-insurance, over-insurance and double insurance in Estonia](https://insurancelawestonia.ee/estonian-insurance-contract-law/under-over-and-double-insurance)
- [Integrated insurance programmes: limits, layers and overlaps](https://insurancelawestonia.ee/specialty-lines/handbook/integrated-programmes)

Legal sources:

- [VÕS §§ 427, 484–487](https://www.riigiteataja.ee/akt/V%C3%95S)
- [KindlTS § 12](https://www.riigiteataja.ee/akt/KindlTS)
- [Rome I Regulation (EC) No 593/2008, Art 7](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32008R0593)

## Practical case

*Write down your own answer before opening the suggested approach.*

A company's liability insurance programme consists of a EUR 5 million primary layer and a EUR 5 million excess layer. During the year three related claims totalling EUR 9 million are made. What must be checked before concluding that EUR 10 million of cover is available?

Suggested approach

Check: whether the limits are per occurrence or aggregate; whether the three claims are treated as a single insured event (related claims clause); whether defence costs erode the limit; the excess layer's attachment condition (exhaustion of the primary layer by paid losses, not merely by claims made) and whether the excess layer follows the primary terms (follow form); sub-limits; the deductible; reinstatement of the limit; whether all claimants and defendants are insured persons.

## Self-check quiz

Answer the three questions and press "Check answers". An explanation is shown for each question.

The self-check quiz requires JavaScript in your browser.

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