Global insurer Allianz made significant reinsurance recoveries in the third quarter which reduced its burden from catastrophe events in the period, leading the firm’s Chief Financial Officer (CFO), Giulio Terzariol, to discuss the firm’s use of reinsurance.
After pre-announcing gross losses of €1.1 billion for the flooding in Europe in July, Allianz reported net losses from the event of €400 million in its Q3 results, suggesting a reinsurance recovery of approximately €700 million.
All in all, natural catastrophe events had a negative impact of €659 million on the insurer’s Q3 operating profit, with the majority coming from the floods and €100 million from the impacts of Hurricane Ida in the U.S.
But despite these losses and its catastrophe burden increasing year-on-year, Allianz reported an improved property and casualty combined ratio of 93.9%, driven in part by its robust use of reinsurance.
Speaking in the company’s Q3 investor call, CFO Terzariol was asked whether they are looking to make changes to their reinsurance program.
“We’ve been looking at our reinsurance structure, because clearly we know also that there will be an increase in reinsurance premium coming our way. So we have looked at different reinsurance structures,” said Terzariol.
“ But at the end of the day we achieved the conclusion that our reinsurance program is pretty good. So, we are comfortable with the program,” he continued.
While the insurer might well tweak its reinsurance program to the aggregate level, Terzariol emphasised that this is more about the attachment point and that fundamentally, it is not changing its reinsurance use.
Additionally, Terzariol told the audience that from a pricing point of view, Allianz is generally a very good account.
“So, from that point of view, yes we expect to see some increases, but in our case, since we are a good account, increases should be more moderate.
“Anyway, these are price increases that we are going to put into our calculations for our premiums. So from that point of view we have analysed different options, but eventually it’s going to be pretty much business as usual with respect to our reinsurance program, just with some tweaking.”
Currently, he concluded, “we are going through the negotiations, so let’s see what comes out of them.”
In spite of the catastrophe events, Allianz reported its strongest third quarter this year, with increases in total revenues and operating profit in the period.
