U.S primary insurer Travelers has revealed that it plans to reduce its exposure to California wildfire risk following back-to-back years of elevated losses.
Michael Klein, President, Personal Insurance and Head of Enterprise Business Intelligence & Analytics at Travelers, explained that the insurer had “already taken action in 2017 to begin to restrict our new business writing appetite.”
However, following a second consecutive year of heavy wildfire losses, Klein said that Travelers has now “implemented further action that will take effect later on this quarter to further restrict that new business underwriting appetite and also to instil new business underwriting procedures.”
Klein’s comments follow the release of Travelers’ fourth quarter results for 2018, which included a pre-tax catastrophe loss of $610 million, up from $499 million for the same period in 2017.
Losses consisted primarily of $453 million from the wildfires in California and $158 million from Hurricane Michael.
Alongside the results, Travelers announced a new property aggregate catastrophe Excess-of-Loss (EoL) reinsurance treaty, as well as the renewal of its corporate catastrophe EoL treaty.
As part of its response to the significant wildfire losses in California, Travelers plans to introduce new underwriting procedures to the peril, including further inspections around defensible space, Klein said, which are expected to tighten the company’s new business underwriting appetite.
The insurer has also entered discussions with the Department of Insurance in California and begun to implement non-renewal action in the state to address some of the more significant wildfire exposures in its portfolio.
“We’re also in discussions with the department about a filing to increase prices for homeowners in California,” Klein continued. “So that gives you a little bit of texture underneath our response to wildfires in particular in the homeowners book.”
Travelers reported increased after-tax catastrophe losses of $1.4 billion for the full-year as part of its results, although its net income increased by $467 million to $2.5 billion due to higher core income.
