Hours Clause
Definition
An hours clause defines how long a single catastrophe 'event' can last for the purpose of an occurrence-based reinsurance contract or cat bond: losses within a stated number of consecutive hours, arising from the same cause, count as one loss event. Typical periods are 72 hours for riot and some storms and 168 hours for windstorm and earthquake, while many U.S. contracts treat a named storm as one event however long it lasts.
Why it matters
The hours clause is where catastrophe meets contract wording. Wildfires, multi-day severe convective outbreaks and floods often last longer than 72 or 168 hours, and the choice of window can move a loss above or below an attachment point. Investors in occurrence layers should read the event definition alongside the trigger.
Common misconceptions
- •One storm is not always one event; outside named-storm wording, the hours window decides.
- •The cedent usually chooses when the hours window starts, within the contract's rules.
- •Parametric triggers do not use hours clauses in the same way; they define events by measurements.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Event definitions in Slide's agreement (2024-25 contract year)
General: 168 consecutive hours, same event.
Named storm: all losses, no time limit; merging storms included.
Windstorm, hail, tornado other than named storm: 168 consecutive hours.
Riot and civil commotion: 72 consecutive hours, one municipality or county plus contiguous ones.
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- What does a real clause say?
- Slide Insurance's property catastrophe agreement with General Reinsurance, filed as an exhibit to its 2025 S-1, limits a loss event to losses 'occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event,' with riot and civil commotion limited to '72 consecutive hours within the area of one municipality or county' and those contiguous to it.
- How are hurricanes handled?
- The same agreement treats all losses from a 'Named Storm' as one event 'without regard to the limitations of duration and extent,' with named storms defined by the U.S. National Hurricane Center and related agencies, and a storm that merges with a named storm counted as part of it.
- Why does the window matter to investors?
- Because it decides whether a long weather episode is one event or several. For an occurrence layer, one large event may attach where several smaller ones would not; for the cedent with a per-event retention, splitting events means paying the retention more than once.