RSA exhausts aggregate reinsurance retention

RSA Group, the UK based general insurance company, said today that it has exhausted the retention under its aggregate reinsurance program, meaning that any major catastrophe loss events in Q4 will fall to its reinsurance panel.

At the same time, the company also reported that its reserves for Covid-19 claims from the pandemic, which it had boosted for the recent Financial Conduct Authority’s (FCA)’s business interruption insurance test case judgement, have now been reduced, lowering that potential burden for its reinsurance partners.

RSA reported that its large loss ratio for the first nine months of 2020 of 9%, excluding the impact of COVID-19. On the attritional loss side, the company reported an improvement, while group weather costs were slightly higher for this year at 3%.

But despite catastrophe impacts seemingly not being too much higher than the prior year, RSA said that it has now reached the retention ceiling on its Group aggregate reinsurance cover.

As a result, the aggregate reinsurance will now provide protection for any individual or catastrophe losses that cost RSA more than £10 million during the fourth-quarter of the year.

At the same time, RSA had some good news for its reinsurers today, saying that it has revised down its estimate of the gross impact of the initial test case ruling by some £20 million.

RSA had previously said that it booked £104 million of losses on a gross basis across its portfolio of relevant business interruption policies due to the test case ruling. But that after catastrophe reinsurance protection, it believes the impact would be nearer £85 million, which its group-wide aggregate reinsurance programme could have reduced further.

This £20 million reduction in reserves due to the business interruption test case may reduce slightly the amount of its pandemic losses ceded to reinsurance capital at this time.

While at the same time, RSA puts reinsurers on-watch for further catastrophe events through the rest of this year with the aggregate retention eroded.