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Original Risk: A Society for Change Agents

RSA’s collateralised reinsurance markets on hook for future losses


Collateralised reinsurance markets that underwrote a portion of RSA Insurance Group’s three-year aggregate reinsurance tower renewal this year are now on the hook for future losses, after the insurer said its retention had been reached.

As our sister site Reinsurance News explained earlier today, RSA announced in its third-quarter 2018 trading update today that the retention ceiling has now been reached for its group-wide aggregate reinsurance cover.

The aggregate reinsurance tower at RSA is a three-year arrangement, that kicks-in when qualifying loss events greater than £10 million collectively cost the insurer more than £170 million in a single calendar year.

RSA has now reached that £170 million retention with severe weather and loss events up to the end of the third-quarter, meaning any future loss events in the fourth-quarter of 2018 that cost the insurer more than £10 million will be paid for by the panel of reinsurance providers that backed the aggregate cover at this year’s renewal.

Among the reinsurance markets backing the tower, RSA had previously said that 9% of the limit was from collateralised markets of some form.

So that could be ILS funds, or other collateralised reinsurance vehicles, which appreciated the exposure to an aggregate deal covering the insurer against losses in short-tail business lines, including property, marine, construction and engineering.

Having reached the £170 million retention limit, future loss events that qualify will be paid for by the reinsurance panel (including collateralised markets) up to pay up to a £320 million exhaustion point, so providing protection for the next £150 million of losses this year.

The retention has been reached thanks to weather losses across all regions in which RSA operates, as well as London market losses in the Marine line of business.

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