Reinsurance News

Cincinnati Financial increases cat event retention at Jan renewals

8th February 2023 - Author: Kane Wells

Steve Johnston, Chairman and CEO of Cincinnati Financial Corporation, has disclosed that the firm increased its cat event retention to $200m at the January reinsurance renewals.

cincinnati-insurance-logoThe news comes from the firm’s Q4 earnings call, where Johnston noted that on January 1st, Cincinnati Financial again renewed each of its primary property/casualty treaties that transfer part of its risk to reinsurers.

Johnston commented, “Our strong capital supports retaining additional risk and managing costs of rising reinsurance ceded premiums.

“For our per-risk treaties, terms and conditions for 2023 are fairly similar to 2022 other than premium rate increases that averaged approximately 13%. The primary objective of our property catastrophe treaty is to protect our balance sheet.”

He continued, “The treaty’s main change this year is retaining a greater share of losses for layers of coverage than what was effective for 2022, while adding $92 million of coverage in a new layer between $900 million and $1.1 billion.”

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In 2023, the firm will retain all of the first $200 million of losses and a share of the next $900 million for a catastrophe event, compared with 2022 when it retained the first $100 million in a share of the next $800 million.

Should Cincinnati Financial experience a 2023 catastrophe event totalling $1.1 billion in losses, it will retain $542 million, compared with $499 million in 2022 for an event of that magnitude.

Further, the firm anticipates that 2023 ceded premiums for these treaties in total to be approximately $130 million, approximately $16 million, or 14% higher than the actual $114 million of ceded premiums for these treaties in 2022.

In its full-year 2022 results, Cincinnati Financial reported a net loss of $486 million, compared with a net income of $2.946 billion in 2021.

For Q4 alone, the firm posted a net income of $1.013 billion, compared with a net income of $1.470 billion for the same quarter of 2021.

This came after recognising an $806 million Q4 2022 after-tax increase in the fair value of equity securities still held.

Cincinnati Financial suggests that the $457 million decrease in Q4 2022 net income reflected the after-tax net effect of a $339 million decrease in net investment gains and a $129 million decrease in after-tax property casualty underwriting profit.

The firm reported a 94.9% Q4 property casualty combined ratio, up from 84.2% for Q4 of 2021.

Full-year 2022 property casualty combined ratio was 98.1%, with net written premiums up 13%.

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