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Travelers secures more aggregate reinsurance at 1/1; raises attachment point

21st January 2021 - Author: Luke Gallin

Travelers has reported the details of its January 1st, 2021 catastrophe reinsurance renewals, revealing an increase in coverage under the firm’s property aggregate catastrophe excess-of-loss reinsurance treaty.

Travelers Insurance umbrellaBack in 2019, Travelers added a new $500 million property aggregate cat treaty to provide it with reinsurance protection for smaller, frequency type events.

Designed to cover losses of over $5 million from PCS-designated catastrophes in North America, the 2019 programme was structured across a $500 million layer in excess of a $1.3 billion retention. Under the 2019 treaty, reinsurers covered 86% ($430 million) of qualifying losses with Travelers retaining 14% ($70 million) of losses.

At the Jan 1st, 2020 renewals, Travelers made some significant changes to the structure of its property aggregate cat treaty, raising the attachment point of the $500 million layer to $1.55 billion of losses, of which reinsurance covered 56%, or $280 million, with Travelers retaining 44%, or $220 million.

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.

In its latest renewal of the property aggregate catastrophe layer of its overall catastrophe reinsurance structure, Travelers has again lifted the attachment point to $1.9 billion of losses. At the same time, reinsurance coverage has increased with 70%, or $350 million of qualifying losses covered by the treaty, meaning Travelers retains 30%, or $150 million of losses.

For the 2021 renewal, Travelers notes that coverage for, and contributions to the $1.9 billion retention from hurricanes and/or tropical storms, earthquakes, and wildfires are limited to $250 million per event.

Of course, Travelers also leverages a corporate catastrophe excess-of-loss reinsurance treaty, which the company renewed at 1/1 2021 under the same terms as the previous year. This layer of protection covers the accumulation of certain property losses arising from one or multiple occurrences.

This $2 billion layer attaches at $3 billion of losses, with the treaty covering 75%, or $1.5 billion of qualifying losses, with the insurer retaining 25%, or $500 million.

So, for 2021, Travelers has secured the same level of occurrence protection from its corporate cat XoL treaty, but enters the year with a greater amount of aggregate reinsurance protection than it did a year earlier, likely in response to the elevated catastrophe experience throughout 2020 which led to a recovery.

It’s also likely that the higher attachment point is in response to the increased cat load in 2020, alongside higher pricing in general as the reinsurance market continues to harden.

Additionally, Travelers has a number of other catastrophe reinsurance arrangements that remain in effect as of January 1st, 2021. This includes its $500 million Long Point Re III Ltd. (Series 2018-1) catastrophe bond transaction; a Northeast property cat XoL treaty; a middle market earthquake cat XoL treaty; a personal insurance earthquake cat XoL treaty; a Canadian property cat XoL treaty; and other international reinsurance treaties.

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