US primary insurer Travelers decided to increase the size of its catastrophe excess-of-loss (XoL) reinsurance treaty at its January 1st, 2024, renewal, with the 2024 tower extending up to $3.525 billion of qualifying losses, compared with $2 billion in 2023, while the retention is unchanged year-on-year.
Alongside the release of its fourth quarter and full year 2023 financial results today, Travelers has provided an update on its 1.1 2024 reinsurance renewal, which is when it renews its occurrence catastrophe XoL treaty for the year ahead.
For 2023, net income rose slightly to almost $3 billion, although underwriting profit for the year fell to $966 million from $1.3 billion in 2022, as catastrophe losses, net of reinsurance, increased to $2.99 billion from $1.9 billion, and net favourable prior year reserve development fell by $506 million to $143 million in 2023.
Following the elevated catastrophe experience in 2023, Travelers has significantly increased the size of its catastrophe XoL reinsurance treaty, which covers the accumulation of certain property losses arising from one or multiple occurrences.
At the recent renewal, the company secured reinsurance protection for recovery up to $3.525 billion part of $4.5 billion of qualifying losses that are covered by the agreement, excess a $3.5 billion retention. Travelers explains that qualifying losses for each occurrence are after a $100 million deductible, which is the same as the 2023 renewal.
Also unchanged from last year is the $3.5 billion retention, but as shown by the diagram of Travelers’ 2023 and 2024 cat XoL reinsurance towers below, last year’s renewal covered $2 billion of qualifying losses excess the retention. So, for its 2024 renewal, Travelers has increased the size of its occurrence cat XoL treaty by $1.525 billion.
Alongside its main cat XoL treaty, Travelers has a number of other cat reinsurance agreements that remain in effect as of January 1st, 2024.
This includes its $575 million Long Point Re IV (Series 2022-1) catastrophe bond transaction; a personal insurance hurricane cat XoL treaty; a Northeast property cat XoL treaty; a middle market earthquake cat XoL reinsurance treaty; a personal insurance earthquake cat XoL treaty; a Canadian property cat XoL treaty; and other international reinsurance arrangements.
The insurer opted not to renew its expiring aggregate cover at last year’s January renewal after consistently making recoveries on the program, while the availability of aggregate reinsurance dwindled as reinsurers moved away from frequency events on the back of heavy losses.
While Travelers has not looked to reinstate aggregate protection at the 1.1 2024 renewal, it has increased the size of its core corporate cat XoL reinsurance by 76%.
