US primary insurer Travelers is fast-approaching the attachment point of its aggregate reinsurance layer, executives revealed in a recent earnings call, which would trigger its $500 million excess of loss coverage.
The company has reportedly used up $1.2 billion of its $1.3 billion retention, so is 92% of the way to triggering its reinsurance program.
As part of its third quarter results, Travelers reported yesterday that its catastrophe losses had reach $801 million, pre-tax and after reinsurance.
However, executives later confirmed that the gross loss figure is in fact much higher, and puts Travelers precariously close to utilising its reinsurance coverage.
Purchased at the January 2019 renewals, Travelers’ $500 million property catastrophe aggregate excess of loss treaty covers its for an accumulation of North American loss events.
These events must be designated as catastrophes by Property Claims Services (PCS) and cause Travelers itself a loss of over $5 million per event.
The reinsurance treaty is effective across a $500 million layer in excess of its attachment at $1.3 billion, with the reinsurance covering 86% or $430 million of this layer and Travelers retaining the other 14% or $70 million.
Travelers previously reported back in July that it had already used up $800 million, or 62%, of its retention.
With half the year still to go, including the majority of the Atlantic hurricane season, it was considered likely that the insurer would end up utilising its reinsurance program for the year.
In 2018, Travelers recorded total catastrophe losses of $1.4 billion for the year, after tax. These were largely driven by the winter storms in the eastern U.S, Hurricane Florence, wind and hail storms in several regions of the U.S and mudslides in California.
The insurer subsequently added the $500 million aggregate reinsurance layer of protection as a brand new treaty to provide it with an additional buffer against smaller, frequency type catastrophe loss events.
