Ida triggers Travelers aggregate reinsurance in Q3, makes $95m recovery

US primary insurer Travelers saw its catastrophe losses in the third-quarter of 2021 eat the rest of the way through its aggregate reinsurance treaty layer retention, resulting in a $95 million recovery during the period.

Travelers had eroded through almost 80% of the retention for its aggregate catastrophe reinsurance layer by the end of the first-half of 2021, as we previously reported.

The remaining 20% of the retention has now absorbed losses from severe weather and catastrophes during the third-quarter of the year, with the result being that the aggregate reinsurance coverage was triggered for Travelers during the period.

As a reminder, Travelers increased its aggregate catastrophe reinsurance protection for 2021, with a renewed treaty covering 70% of a $500 million layer, so $350 million of coverage and a $150 million retention, above $1.9 billion of qualifying losses.

By the end of Q1 Travelers had accumulated some $915 million of qualifying losses towards the aggregate retention of its reinsurance, with that figure rising to roughly $1.5 billion by the end of Q2 2021.

For the third-quarter, Travelers has today reported catastrophe losses of $501 million pre-tax compared to $397 million pre-tax in the prior year quarter.

“We are very pleased to report excellent underlying underwriting and investment results, contributing to third quarter core income of $655 million, or $2.60 per diluted share, and core return on equity of 10.1%, a strong result despite significant catastrophe losses in the quarter,” said Alan Schnitzer, Chairman and Chief Executive Officer said today.

Year-to-date, for the nine months to September 30th, Travelers catastrophe losses, net of reinsurance, now stand at $1.811 billion, so running ahead of the prior year’s $1.584 billion.

However, Travelers aggregate reinsurance has not yet been as badly eroded as in 2020, given the higher attachment point of its renewed aggregate catastrophe reinsurance treaty.

In Q3 2021, Travelers said that its catastrophe and non-catastrophe weather-related losses were reduced by $95 million of recoveries from its 2021 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.

Last year, catastrophe and non-catastrophe weather-related losses in Q3 2020 were reduced by $280 million of recoveries available under the aggregate reinsurance.

This year’s catastrophe losses are primarily from hurricane Ida, as well as severe storms in several regions of the United States, Travelers said.

Travelers estimates its losses from hurricane Ida at $425 million, net of reinsurance.

It’s notable that Ida is not the biggest loss of the year for Travelers. That remains the winter storms from Q1, the loss from which now stands at $508 million after reinsurance for the company.

Last year, the aggregate reinsurance treaty attached at $1.55 billion of losses, so through the attachment point rising to $1.9 billion the reinsurance market has avoided what could have been another $350 million of losses.