Property and casualty insurer, The Hartford, no longer expects to make a recovery against its aggregate catastrophe reinsurance treaty for the 2017 accident year, as a result of a reduction in its estimates for prior year catastrophe losses, primarily related to third-quarter hurricanes.
As of December 31st, 2017, The Hartford reported gross cat losses for the 2017 accident year of $940 million, with $500 million coming from personal lines and $40 million from commercial lines. As of March 31st, 2018, this figure declined to $919 million, with the personal lines element falling to $497 million, and the commercial lines falling to $422 million.
Despite the decline during the first-quarter, the firm still expected to receive a recovery from its aggregate catastrophe reinsurance treaty for the 2017 accident year, which attaches at $850 million. However, the reductions in estimated losses for the 2017 storm events continued through the second-quarter.
As of June 30th, 2018, The Hartford reports gross cat losses for the 2017 accident year of $817 million, with $470 million coming from personal lines, and the remaining $347 million coming from commercial lines.
The combined, $123 million reduction means that The Hartford’s gross cat losses for the 2017 accident year fall below the $850 million attachment point of its aggregate catastrophe reinsurance program, which reversed the previously recorded reinsurance recoverable.
“As a result of lowering these estimates, we no longer expect to receive a recovery against our aggregate catastrophe reinsurance treaty for the 2017 accident year. The benefit from the aggregate treaty was allocated to each business unit based on our estimate of ultimate losses for the full year,” explained President Doug Elliot, during the firm’s Q2 2018 earnings call.
As a result, commercial lines experienced net favourable catastrophe prior year development, while personal lines experienced net unfavourable catastrophe prior year development, as commercial lines catastrophe estimates decreased by more than personal lines, explains The Hartford in its Q2 earnings call.
The P&C insurer also announced that its 2018 catastrophe aggregate treaty net retention is $825 million, versus $850 million in 2017.