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Extracontractual Obligations

Extracontractual Obligations (ECO)

Definition

Extracontractual Obligations (ECO) — the requirement under a policy that the insurer pay certain losses or expenses not arising from the insuring agreement but from externally imposed obligations—for example, fines from a court or regulatory body. If ECOs are covered under a reinsurance agreement, the reinsurer pays punitive damages imposed on the insurer.

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