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Travelers nearly halfway to triggering aggregate reinsurance cover

21st April 2021 - Author: Matt Sheehan

Travelers has reported that it accumulated almost $915 million of qualifying losses towards its aggregate retention during the first quarter of 2021.

Travelers

The insurer lifted the attachment point of its catastrophe reinsurance structure to $1.9 billion at the January renewals, meaning it is almost halfway to triggering its coverage with only three months of the year down.

Travelers renewed its underlying property aggregate catastrophe XOL Treaty for 2021 with aggregate coverage of $350 million part of $500 million of losses above the $1.9 billion retention.

This means 70% of its losses above that level will be ceded to reinsurers, while Travelers will retain 30%, or $150 million, of the losses.

Earlier this week, Travelers reported a year-on-year increase in net income to $733 million for Q1 2021, despite catastrophe losses, net of reinsurance, hitting $835 million.

Up from $600 million in the prior year period, the increase was driven by higher core income, higher net favourable prior year reserve development and higher net investment income, partially offset by elevated catastrophe losses.

During the quarter, underwriting income declined from $288 million in Q1 2020 to $217 million, as the firm recorded its highest ever amount of Q1 catastrophe losses, primarily as a result of the severe winter weather in the U.S.

$506 million of these cat losses fell to Travelers business insurance segment, $305 million in the personal insurance segment, and $24 million in its Bond & Specialty Insurance segment.

In comparison, Travelers recorded catastrophe losses, net of reinsurance, of $333 million in the first-quarter of 2020.

As a result of the catastrophes, the combined ratio of 96.6% increased 1.1 points, however remains in profitable territory amid net favourable prior year reserve development of $317 million, compared with just $27 million a year earlier.

Throughout last year the company incurred catastrophe losses of more than $1.6 billion and by the end of Q3, had made a full $280 million recovery under its property aggregate catastrophe XoL reinsurance treaty.

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