Also known as a "bikini deductible," this 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. It 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. Corridor SIRs 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 corridor
SIR 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. It is also used in structured
insurance arrangements. Corridor SIRs can be designed to cover non-aggregated
per occurrence limits or a combination of per occurrence and aggregate limits.
A typical corridor SIR will include per occurrence limits perhaps subject to an
annual aggregate, depending on the risk and the excess insurance pricing.