Which factor must be unimpaired at the effective date of the excess liability policy?

The correct choice identifies the limits of the underlying insurance as a critical factor that must be unimpaired at the effective date of the excess liability policy. Excess liability insurance is designed to provide additional coverage beyond the limits of the underlying primary insurance policies. If the limits of these underlying policies are not unimpaired, it undermines the foundation on which the excess coverage is predicated. Insurers rely on the underlying limits to determine the appropriate risk to cover and the premiums to charge.

For instance, if the underlying insurance limit has been reduced due to a claim payout or is otherwise impaired, the excess policy may face challenges in effectively providing additional coverage, as it may not respond in the manner expected based on the original structure of the insurance program. This is why maintaining the integrity of the underlying limits is paramount for the valid activation of the excess policy.

In contrast, while the financial stability of the insured, their claims history, and geographical location are all important factors in underwriting and risk assessment, they do not have the same direct impact on the efficacy of the excess policy's coverage. The excess liability policy fundamentally hinges on the assumption that the underlying limits are intact, making that factor essential for the policy's effectiveness.