Cincinnati Financial recovers for Derecho, Kemper hits aggregate retention

U.S. property and casualty insurers continue to benefit from support from their reinsurance programs for paying losses for catastrophe events that struck during the third-quarter.

As we have explained, third-quarter 2020 catastrophe losses look set to come in above expectations and in many cases budgets.

While this elevates the chance of reinsurance recoveries being seen, because of the way multiple, smaller industry losses have been seen, a lot of the reinsurance capital impact caused by Q3’s losses is expected to be in terms of aggregate deductible erosion and some losses on agg towers.

There have been per-occurrence reinsurance claims as well, but it seems the aggregate structure is again going to come under more pressure in 2020, as has been seen in some recent years as well.

Also reporting loss impacts this week were insurers Cincinnati Financial and Kemper Corporation.

Cincinnati Financial revealed $266 million of pre-tax catastrophe losses for the quarter, but in announcing the toll from multiple loss events, the only one it said it made a reinsurance recovery for was the Midwest Derecho from August.

That Derecho caused the carrier around $103 million of losses, after an estimated reinsurance recovery of $17 million, Cincinnati Financial explained.

The insurer said that hurricane Laura caused it around $46 million in losses, while the rest of the Q3 bill was from catastrophe losses from several less severe storms.

Meanwhile, Kemper Corporation said that it expects to report third-quarter catastrophe losses amounting to $62 million to $68 million, largely due to wildfire and hurricane events.

While Kemper said that it does not expect to recover any of these losses under its reinsurance programs, it has now met its catastrophe aggregate retention level thanks to the Q3 catastrophe loss burden.

That suggests any additional losses running through the fourth-quarter, such as perhaps hurricane Delta, could see some claims flowing to the reinsurers supporting Kemper’s aggregate tower.

Also read: Q3 catastrophe losses to trigger aggregate reinsurance recoveries: Fitch.