Travelers has successfully renewed some of its catastrophe reinsurance treaties at the January 1st, 2020 renewals, which shows that the firm is to retain a much higher share of its losses this year under changes made to its underlying property aggregate catastrophe excess-of-loss reinsurance treaty.
This time last year, the U.S. primary insurer revealed that it had secured an additional $500 million property aggregate catastrophe excess-of-loss treaty, alongside the renewal of its corporate catastrophe excess-of-loss treaty.
The first version of the 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.
For 2020, Travelers has renewed its aggregate reinsurance treaty again as a $500 million layer. However, some of the terms have changed fairly significantly this year, and under the renewal, this aggregate layer of protection attaches higher at $1.55 billion of losses, and, at the same time, the company’s reinsurers will only retain 56%, or $280 million, with Travelers retaining a much higher slice then before, 44% or $220 million.
The 2020 aggregate reinsurance treaty covers the accumulation, from dollar one, of qualifying losses from PCS-designated catastrophe events in North America, for which Travelers incurs losses of $5 million or higher per event.
Travelers adds that coverage for, and contributions to the $1.55 billion retention, from hurricanes and/or tropical storms and earthquakes are limited to $250 million per event.
It’s unclear if the changes made to its aggregate reinsurance treaty at the recent renewal was by choice or not, as reinsurers might well have called for tighter terms in light of the losses recently experienced on some aggregate treaties.
Last year, Travelers revealed that as of the end of the third-quarter, it had already used $1.2 billion of its $1.3 billion retention for its aggregate cover, suggesting that by year-end there might well have been a small claim made on this programme.
At the same time, Travelers has announced the successful renewal of its corporate catastrophe excess-of-loss reinsurance treaty, which covers the accumulation of certain property losses arising from one or multiple occurrences. From what has been disclosed by the firm, this layer of protection has been secured under the same terms and with the same features as last year.
This layer attaches at $3 billion of losses and the insurer is covered for 75%, or $1.5 billion of qualifying losses, retaining 25%, or $500 million across the $2 billion layer that sits above the attachment point. The firm notes that qualifying losses for each occurrence are after a $100 million deductible.
As well as the renewal of these two treaties, Travelers has a number of other catastrophe reinsurance arrangements that remain in place as of January 1st, 2020.
This includes its $500 million Long Point Re III Ltd. (Series 2018-1) catastrophe bond transaction, as tracked in our sister site Artemis’ extensive Deal Directory of catastrophe bond and related insurance-linked securities (ILS) transactions. This deal is scheduled to mature in June of 2022, so it could be the case that Travelers tops this up, or, issues a renewal of the deal as maturity draws closer.
Travelers also has in-force its Northeast property catastrophe excess-of-loss arrangement; a middle market earthquake catastrophe excess-of-loss agreement; a personal insurance earthquake catastrophe excess-of-loss agreement; a Canadian property catastrophe excess-of-loss reinsurance treaty; and, other international reinsurance treaties.
