Cincinnati Financial Corporation benefited from a retrocessional reinsurance recovery for its reinsurer unit Cincinnati Re after hurricane Ida, capping the net incurred loss from the storm at $80 million for the company.
Cincinnati Re is a growing reinsurance underwriting operation for the company, writing treaty business and ceding some of that risk to retrocessionaires.
As a result, the unit was exposed to losses from hurricane Ida this quarter.
Across the Cincinnati insurance and reinsurance business, catastrophe losses contributed 14.2 and 9.6 percentage points to the combined ratio in the third quarter and first nine months of 2021, both improvements on the 18.3 and 14.7 percentage points in the same periods of 2020.
The company said that its retrocessional reinsurance program for Cincinnati Re responded to hurricane Ida, and provided a recovery based on an estimated loss for the hurricane as of September 30th.
Cincinnati Re’s excess-of-loss retro reinsurance attaches at a per-occurrence loss of $80 million and offered the company $48 million of cover above that.
In the case of hurricane Ida, Cincinnati Re benefited from a recovery of around $18 million, based on the loss estimate.
So the attachment was hit and Cincinnati retained $80 million of its exposure to hurricane Ida, while its retro partners paid the rest, with these figures excluding the benefit of reinstatement premiums estimated at approximately $11 million.
Cincinnati’s total incurred net losses from hurricane Ida, after reinsurance, are estimated at $169 million, so close to half has come from its reinsurance business, even after the retro protection.