Analysts are anticipating that Travelers will have made further recoveries under its catastrophe aggregate reinsurance program during the fourth quarter of 2021.
There appears to be consensus among figures at Bloomberg, KBW and Morgan Stanley that the US primary insurer’s Q4 results – due next week – will reveal further aggregate reinsurance recoveries made in the quarter following severe weather events.
It was reported as early as April last year that Travelers was already nearly halfway to triggering its aggregate cover, after accumulating almost $915 million of qualifying losses during Q1.
This figure rose to $1.5 billion by the end of H1, meaning Travelers was almost 80% of the way towards its aggregate retention of $1.9 billion at the halfway point in the year.
The insurer then reported a $95 million recovery after its aggregate reinsurance was triggered in Q3, due to elevated catastrophe losses that included the impacts of Hurricane Ida.
Travelers renewed its aggregate catastrophe reinsurance treaty in January of 2021, securing slightly more coverage than in the previous year, but at a higher attachment point.
The treaty was upsized to cover 70% of a $500 million layer above an attachment of $1.9 billion, so $350 million of coverage across this layer.
It covered Travelers for qualifying losses from PCS-designated catastrophe events in North America in excess of $5 million per catastrophe event, up to a maximum of $250 million per-event.
Now, looking back over Q4, analysts believe it’s likely that further severe weather events will have enabled Travelers to make more recoveries during this period, with the US tornadoes and severe convective weather in particular standing a strong chance of exceeding the insurer’s $5 million per event qualifying limit.
If confirmed, these recoveries should significantly reduce Travelers’ Q4 catastrophe loss total, but with its aggregate treaty having now been utilised three years in a row, they may have resulted in a challenging renewal period for the company.
Travelers typically renews its coverage around the January period, so the market can expect to get a full picture of the firm’s Q4 recoveries, as well as any changes to the terms of its coverage for the coming year, very shortly.
