Block limits are aggregate caps set for a defined group of risks, such as a geographic block, a line of business block, or a shared class of policyholders.
Underwriting perspective
Actuaries and underwriters monitor accumulated exposure inside each block. If the collective loss volatility starts to rise, limits can be tightened or the block can be split into smaller underwriting units.
Claims effect
Every claim against the block consumes part of the block limit, even when each claim belongs to different insured units. Clear rules are needed for ordering, exhaustion, and whether prior losses reduce capacity for future coverage periods.
Example
An insurer grants one property block limit for all retail stores in a chain. A large fire loss at one location reduces available block capacity for the rest of the chain under the same period.