Global insurer Chubb successfully renewed its global property catastrophe reinsurance program at the April renewal for its North American and International operations, as well as its terrorism coverage, with “no material changes in coverage from the expiring program,” although the retention has increased.
Effective April 1st, 2023, through March 31st, 2024, Chubb’s renewed global property cat reinsurance program consists of three layers in excess of losses retained by the insurer on a per occurrence basis.
This year, for losses in the U.S. (excluding Alaska and Hawaii), Chubb’s all natural perils and terrorism cover attaches after a $1.1 billion retention, up $100 million from the $1 billion retention in the 2022 program.
The first layer of protection, which has been partially placed with reinsurers, attaches at $1.1 billion up to $1.25 billion. Both the second layer and third layer are fully placed with reinsurers, and cover losses from $1.25 billion to $2.35 billion and $2.35 billion to $3.5 billion, respectively.
The $3.5 billion exhaustion point for the US catastrophe side of the program is the same as last year’s program, it’s just that all the layers kick in $100 million higher up.
On the International side, including Alaska and Hawaii, the retention has been increased year-on-year by $25 million to $200 million, after which all natural perils and terrorism coverage attaches up to $1.3 billion of losses, whereas last year this layer attached at $175 million up to $1.275 billion.
This year, after $1.3 billion of losses, sits Alaska, Hawaii, and Canada catastrophe and terrorism coverage up to an exhaustion point of $2.45 billion. Last year, this slice of coverage attached at $1.275 billion and the program’s exhaustion point was $2.525 billion, so has come down by $75 million.
All in all, Chubb has slightly less reinsurance available for 2023, and more losses are likely to be retained, which is evidenced by the firm’s modelled probable maximum loss (PML) disclosures.
These show the primary insurer’s 1-in-100 worldwide annual aggregate loss at $5.197 billion, which amounts to 9.8% of shareholders equity, compared with $4.558 billion, or 8.8% of shareholder equity a year earlier.
Chubb’s 1-in-100 year PML for US hurricane risks has also risen, to $3.477 billion, or 6.6% of shareholders equity, against $2.916 billion, or 5.6% of shareholders equity a year earlier.
The company’s 1-in-100 year PML for California earthquake risk has also risen year-on-year, although not by as much. It currently stands at $1.392 billion, or 2.6% of shareholders equity, compared with $1.314 billion, or 2.5% of equity a year earlier.
The reason the PMLs have increased by this much is down to robust growth at Chubb in recent times, as well as the reduction in available reinsurance through to March 2024 given the tower is the same size but the retention has risen.
