Travelers’ decision to obtain extra reinsurance protection is mainly due to the recent inflationary impact on insured values according to Chief Financial Officer (CFO), Dan Frey.
The US insurer has recently released an update on its 1.1 2024 reinsurance renewal, which is when it renews its occurrence catastrophe excess-of-loss (XoL) treaty for the year ahead.
As part of the renewals, for 2024 the reinsurer secured coverage for $3.5bn of the $4.5bn layer above the $3.5bn attachment point, Frey noted.
He highlighted: “We are pleased to have obtained the extra protection in light of the recent inflationary impact on insured values. Context, we’ve never hit this treaty. Nonetheless, this is prudent affordable balance sheet protection for tail events.
“The cost of the additional reinsurance will be largely offset by the strong renewal pricing. We continue to achieve our direct written property premiums, resulting in only a minimum impact on the underlying combined ratio.”
Following the elevated catastrophe experience in 2023, Travelers significantly increased the size of its catastrophe XoL reinsurance treaty, which covers the accumulation of certain property losses arising from one or multiple occurrences.
It decided to increase its size with the 2024 tower extending up to $3.525bn of qualifying losses – part of $4.5 billion of qualifying losses that are covered by the agreement.
Travellers also released its fourth quarter and full year 2023 financial results, reporting a net income rose slightly to almost $bn, although underwriting profit for the year having fallen to $966mn from $1.3bn in 2022.
Regarding catastrophe losses, net of reinsurance, the impact increased to $2.99bn from $1.9bn, and net favourable prior year reserve development fell by $506mn to $143mn in 2023.
