Stop loss excess aggregate programs are similar to self-insured retention (SIR) programs because they both allow an insured to retain more control of its assets. While a traditional SIR program pays excess of specific loss amounts, the stop loss excess aggregate pays in excess of a set aggregate that applies over all losses.
This allows the insured to have more certainty on the maximum loss amount for which it will be responsible in a given policy period. Most insureds choose a third-party administrator (TPA) to handle claims. A number of large insurers and brokerage firms provide TPA services for their accounts on either a fee basis or as part of a total risk management services program
The advantage of using an SIR is a reduction in insurance costs, use of the cash flow until a loss actually occurs at which time the insured sets up a reserve fund to pay losses instead of the insurer paying, and better control of loss prevention.
The insured's primary concern is the unlimited exposure that can be resolved with the stop loss excess aggregate method. Coverages often include workers compensation, auto liability, and commercial general liability.