Reinsurance News

Zurich drops agg reinsurance cover, adds quake & top cat layers

10th February 2023 - Author: Matt Sheehan

Zurich Insurance Group has disclosed details of its reinsurance renewals for 2023, which include a decision to drop its global aggregate catastrophe treaty, as well as the addition of a US quake layer and a new top catastrophe layer.

Zurich LogoThe company’s aggregate cover had previously provided it with $250 million of protection after a $900 million retention, which was further extended by $200 million thanks to a combined global cat treaty.

However, executives warned as early as August last year that they might not seek to renew this coverage, depending on how reinsurance rate increases materialised ahead of the January renewals period.

With pricing having only gained momentum since then, Zurich clearly feels that it would rather forego this coverage and retain the additional risk on its balance sheet, rather than pay the higher rate.

But even without the aggregate cover, Zurich still maintains three towers of reinsurance coverage in place across its business, namely for Europe all perils, US all perils, and rest of world all perils.

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And these three towers have each seen the addition of new layers, including a $200 million US earthquake swap, and a new $300 million top cat layer.

For its European tower, Zurich’s retention now stands at $462 million, versus $434 million last year, with an enlarged $424 million regional cat treaty sitting above this, and a $1.2 billion treaty remaining unchanged. Past this, last year’s $200 million combined cat layer has not been renewed.

Next, for the US tower, the company’s retention and regional cat treaty are unchanged at $650 million and $550 million, respectively, but the program now features a $300 million top cat layer sitting above this, followed by a $550 million retention and a new $200 million US earthquake swap.

Finally, for its rest of the world protection, Zurich maintain its retention at $200 million with a regional cat treaty of $300 million, but expanded its top cat layer to $300 million, up from $200 million previously.

Zurich posted a 12% increase in business operating profit for 2022, including a 14% increase in operating profits for its property and casualty segment on a combined ratio of 94.3%. Overall operating profit came to $6.5 billion, compared with $5.7 billion for 2021, while P&C profits amounted to $3.6 million.

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