US insurance giant Progressive believes that it will trigger recoveries under its aggregate catastrophe reinsurance coverage in the third-quarter of the year, as severe weather events have eroded the retention under the protection considerably.
Progressive reported total net catastrophe losses incurred for the second-quarter of 2023 amounting to $1.024 billion, up considerably from the prior year periods $528 million.
For the first-half of 2023, Progressive’s net catastrophe losses have now reached $1.265 billion, up on the previous year’s $675 million.
The insurer said it was affected by 19 and 43 catastrophic weather events in Q2 and H1 of 2023, respectively, compared to 23 and 34 events in the same periods last year.
Q2 2023 catastrophe losses reflected severe weather events across the United States, with Texas, Florida, and Colorado making up just over half of the losses, although 35 states were affected in total for the quarter and 44 states for the first six months of the year.
Progressive also said that in 2023 it has secured a new aggregate excess of loss reinsurance contract, providing multiple layers of coverage.
The first retention layer threshold ranges from $500 million to $575 million, excluding named tropical storms and hurricanes, and a second retention layer has a threshold of $600 million, which includes named tropical storms and hurricanes.
The first and second layers of the aggregate reinsurance provide coverage up to $100 million and $85 million, respectively.
Progressive noted that, “While the total coverage limit and per-event retention will evolve to fit the growth of our business, we expect to remain a consistent purchaser of reinsurance coverage.”
By the end of the second-quarter, Progressive said that it is now only $40 million to $50 million below the annual retention thresholds under its 2023 catastrophe aggregate excess of loss program, based on the layer.
As a result, the insurer said, “We will likely exceed a portion of our retention threshold during the third quarter 2023.”
Once that retention threshold is breached the aggregate reinsurance protection attaches and recoveries of up to $100 million will be available for non-named storm property catastrophe losses, Progressive said.
Progressive’s experience through the first-half has been similar to many other US insurance carriers, with elevated catastrophe losses caused by the severe and convective storm activity that has occurred.
There are other carriers who’s loss run-rate means they will near aggregate reinsurance attachment points later this year and the SCS activity has also contributed to aggregates under some catastrophe bonds as well, such as in the case of Allstate.