CDL Special Topics

Amounts

Each term has an amount, as does each cover limit and each cover attachment. Amounts in CDL can be a monetary amount (100 USD) or an expression resolvable to a monetary amount. This resolution can be done once if it is not event-dependent (5% RCV Covered), or once per event if it is event-dependent (5% RCV Affected, 10% of Loss). The currency is the contract currency (as per contract declarations) unless otherwise overridden.

If the term applies "per risk" then the amount applies to each risk the term is "to." If the amount is a function that varies by risk, it must also be evaluated per risk, e.g. max(5k, 2% RCV Covered).

CDL enables the use of convenient multipliers: k, M, and B are shorthand for *10^3, *10^6, and *10^9.

Time Basis

Time basis of a term, cover limit, or cover attachment can be per occurrence (assumed if not stated) or "aggregate" across the period (period is the time between the declared inception and expiration).

Aggregate is dealt with via erosion. The amount used in the event reduces the effective amount that much for the next event.

Example: Aggregate deductible of 200. First event comes in and produces 150 of D at that term. Effective deductible for the next event in the period is 200-150 = 50. Attachments function similarly.

When considering erosion of aggregate cover elements, covers are at 100% with share applied as a final step – only to the payout.

Example: Cover has 50% of aggregate 10M limit. First event comes in at 8M. Payout is 50% * Min(8M,10M) = 4M. Amount of limit remaining for subsequent events is 10M-8M = 2M. The most that could be subsequently paid out is 50% of that amount = 1M.

Sections

Sections are an optional component of a contract that have a name and their own declarations and covers. Contract declarations are inherited by each section, but the section can append and override those with their own declarations. A section exposes its payout but not the payout of its individual covers. For order of operations, sections go before “contract-level” covers (covers outside any section).

Contract-level covers can be on:

  • Other contract-level covers
  • Sections

While section-level covers can be on:

  • Other covers in the same section
  • Other sections

“Covers by section” is a concise way to express in CDL that this contract’s payout is the sum of section payouts. In such contracts, section-level covers cannot be on other sections.

Cover Subject

Like terms, covers can be unconstrained (apply to the full contract subject) or constrained in any of the three dimensions that constrain terms—subschedule, causes of loss, and loss types.

Other Inputs

In addition to claims, certain settings and subject exposure attributes are inputs to the calculation:

  • Settings
    • Table of currency exchange rates
    • Hierarchy of causes of loss
    • Hierarchy of loss types
  • Exposure Attributes
    • Which exposures (risk item and loss type) are part of which risk
    • The replacement cost value of each exposure
    • Which risks are part of which subschedule (if needed)