US primary insurer Travelers has disclosed that it recovered $101 million of catastrophe losses from its aggregate reinsurance treaty during the fourth quarter of 2019.
The company recorded a total of $186 million of pre-tax catastrophe losses in the quarter, but only incurred an $85 million loss after factoring in its reinsurance recoveries.
Protection was provided by Travelers’ $500 million aggregate property catastrophe excess of loss treaty, which the company added at the January 2019 renewals alongside the renewal of its corporate catastrophe excess-of-loss treaty.
This arrangement was structured across a $500 million layer of coverage in excess of an attachment of a $1.3 billion retention, with the treaty covering 86%, or $430 million of this layer of coverage, and Travelers retaining the other 14%, or $70 million.
Travelers recently announced that it had renewed this treaty for 2020, again as a $500 million layer, but with some significant changes to the terms.
Updates include a higher attachment point at $1.55 billion of losses and Travelers now retaining a higher 44%, or $220 million.
Speaking as part of an earnings call last week, Travelers’ Chief Financial Officer (CFO) Dan Frey said that the company’s losses had exceeded $1.3 billion retention on its 2019 program.
Given that Travelers retain 14% of losses above this attachment point, it seems that the firm’s gross qualifying aggregate losses must have totalled around $1.418 billion, in order to result in the $101 million recovery.
Losses that qualified under the terms of this aggregate treaty had reached $1.2 billion as of the end of Q3 2019, so the remaining just over $200 million must have been added during the last quarter of the year.
The catastrophe loss update came alongside the release of Travelers’ Q4 results last week, which saw the company’s net income rise 41% to $873 million, as well as a slightly weakening in the combined ratio, which was recorded at 92.1%.
