RSA Insurance Group, a leading commercial and general insurer, has reached the retention ceiling on its group aggregate reinsurance coverage, meaning any further large losses may hit the firm’s reinsurance providers.
In announcing its third-quarter 2018 trading update today, RSA said that the retention ceiling has now been reached on its group-wide aggregate reinsurance cover, which as a result means the cover is now on-risk and will provide the insurer with protection for any individual losses of over £10 million during Q4.
The RSA group-wide aggregate reinsurance cover provides the firm with protection once large loss experience passes an aggregate retention of £170 million, with a further £150 million of coverage limit then kicking in.
In order to qualify as an event, under the terms of the aggregate cover, losses need to be £10 million or greater in size.
The insurer said that large losses in its UK unit have hurt the firm, as RSA’s UK and London market business made an underwriting loss of roughly £70 million during the third-quarter, equivalent to a combined ratio or around 110%.
Impacting the firm during the quarter were higher weather losses, large losses and also attritional claims. RSA said that its Marine underwriting portfolio was the hardest hit area of the business.
Year-to-date the firm revealed that weather losses have been higher than in 2017 across all regions, particularly in Canada and the UK.
As a result, the Group weather ratio came out at around 4.6%, well up on the five-year average of 3.2% and Q3 2017’s 2.4%.
Despite a spike in large losses in the UK in Q3, overall they are are lower than last year, while being a little worse in Canada and Scandinavia.
The Group large loss ratio of around 11% is also higher than the five-year average of 9.0%, but slightly better than Q3 2017’s 11.3%.
On the attritional side, loss ratios year-to-date in all regions are roughly equivalent with the prior year, RSA said, but noted that Q3 deterioration in the UK was largely driven by Motor and Marine books of business.
With RSA’s reinsurers now on hook for any losses above £10 million for the rest of the aggregate term the winter storm season will be a focus over the coming months.