Property and auto-focused insurance group, Progressive, renewed its aggregate excess of loss (XoL) reinsurance program for its property business at the January renewals with a lower retention for both layers, and has also renewed and upsized its hurricane coverage for the 2024 wind season.
The new aggregate XoL reinsurance arrangement entered into by the firm in January 2024 has multiple layers which provide total protection of $185 million for catastrophe event losses and allocated loss adjustment expenses (ALAE).
For 2024, the first retention layer threshold ranges from $450 million to $475 million and provides coverage of $85 million. This is different than the prior year, when the program’s first retention layer threshold ranged from $500 million to $575 million, providing coverage up to $100 million.
In line with last year, for 2024, the first layer of reinsurance does not provide coverage for named tropical storms or hurricanes. In 2023, Progressive exceeded the first layer annual retention threshold by $17.9 million.
The second retention layer threshold has fallen from $600 million in 2023 to $525 million for 2024, and provides $100 million of coverage, compared with $85 million last year. The second layer includes coverage for named tropical storms or hurricanes, and also includes a secondary coverage part with a retention threshold of $425 million that shares the same $100 million limit.
So, while the amount of limit secured by Progressive for its aggregate XoL renewal is unchanged year-over-year, for 2024 the reinsurance protection for both layers attach lower for the company.
Progressive has also already renewed a shared limit hurricane coverage for June through December 2024 at a larger size than the prior year. Last year, this agreement provided $125 million of coverage for named storms and, during the year, the firm ceded no losses under this coverage. For 2024, this has been renewed for $175 million of reinsurance coverage, so up $50 million year-over-year.
The insurer also has an occurrence XoL reinsurance program, under which it is responsible for the first $200 million of losses and ALAE for the first event. As at December 31st, 2023, coverage limits in place, net of retention, are $2.4 billion for a first event in Florida, and $2 billion for second event outside of the state.
During the course of 2023, Progressive confirms that no losses were ceded under its occurrence XoL arrangement related to storms in the year. In February 2024, the catastrophe bond Bonanza Re Ltd. (Series 2020-1) matured, which reduces the firm’s maximum coverage limits by $200 million, irrespective of the location of the first event.
Finally, the company also has a reinsurance program in place for its commercial lines business, designed to help manage certain exposures in commercial auto, TNC, BOP, and workers’ compensation products. For TNC, and certain workers’ compensation and BOP product coverages, the business leverages quota share reinsurance agreements, under which it cedes a portion of premiums, losses, and, in most cases LAE.
As part of the commercial lines reinsurance program, Progressive also has XoL reinsurance agreements for higher-limit commercial auto liability, and certain BOP and workers’ compensation product coverages, which reinsure a portion of loss above a retention threshold.
