US primary insurer Travelers accumulated $935 million of qualifying losses towards the aggregate retention of its $2 billion property catastrophe reinsurance treaty during H1 2022, according to the company’s Chief Financial Officer (CFO), Dan Frey.
Yesterday, Travelers announced a decline in net income for the second-quarter on the back of $746 million of catastrophe losses, pre-tax and net of reinsurance. Combined with Q1, this took the carrier’s H1 2022 catastrophe loss total to $906 million.
However, speaking during an earnings call yesterday, CFO Frey, said that “Year to date, we’ve accumulated $935 million of qualifying losses towards the aggregate retention of $2 billion on our property catastrophe aggregate excess-of-loss treaty.”
He noted that although catastrophe losses were up year-on-year, “they were not outside our modelled expectations.”
This means that at the mid-point of 2022, the insurer has seen the erosion of almost 50% of its aggregate retention.
At the January 1st, 2022, reinsurance renewals, Travelers opted to reduce the size of its aggregate reinsurance protection under tighter terms, in response to both loss activity and market conditions.
Under this treaty for 2022, reinsurance covers the accumulation of qualifying losses from PCS-designated catastrophe events in North America in excess of $10 million per event, structured across a $500 million layer in excess of a $2 billion retention.
But it’s important to remember that of this $500 million layer, reinsurers will cover 45%, or $225 million, of qualifying losses, with Travelers set to retain the remaining 55%, or $275 million.
In comparison, last year’s aggregate treaty saw reinsurers agree to accept 70%, or $350 million of qualifying losses, with Travelers retaining just 30%, or $150 million, of losses. While the 2021 aggregate treaty also had a $5 million per-event qualifying term in the contract.
Although the Atlantic hurricane season is underway, it’s yet to peak, so it will be interesting to see if any of the treaty’s reinsurers manage to avoid any losses this year.
In both 2021 and 2020, Travelers completely eroded its aggregate reinsurance.
