Travelers exhausts aggregate reinsurance in 2021, recovers $255m in Q4

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As anticipated, US primary insurance giant Travelers has reported a significant recovery under its catastrophe aggregate reinsurance treaty in the fourth-quarter of 2021, as the company made a $255 million recovery, reducing its quarterly cat loss burden to just $36 million.

travelers-logoAs we explained last week, Travelers was expected to benefit from further recoveries under its catastrophe aggregate reinsurance arrangement for the fourth-quarter of 2021.

In the third-quarter of the year, Travelers reported a $95 million recovery after its aggregate reinsurance was triggered by events including hurricane Ida.

That put the treaty in a state where it was open to further recoveries, from PCS-designated catastrophe events in North America that caused Travelers a loss in excess of $5 million per catastrophe event, up to a maximum of $250 million per-event.

With tornadoes and severe convective weather, as well as wildfires, all a factor in Q4 2021, it’s no surprise Travelers has made a recovery.

The size of the recovery might have been disappointing to some of the markets that wrote Travelers aggregate catastrophe excess-of-loss reinsurance, with a recovery of $255 million booked in Q4 2021.

A year earlier, Travelers had fully exhausted its aggregate cover by the last quarter of the year.

That took the total recoveries Travelers made under the aggregate reinsurance in 2021 to $350 million for the full-year, which represents a full exhaustion of the coverage

In 2020 Travelers made $280 million of recoveries under its Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.

For 2021, the aggregate treaty had been restructured somewhat, to cover 70% of a $500 million layer above an attachment of $1.9 billion, so $350 million of aggregate coverage across this layer.

The structure seems to have worked well for Travelers in 2021, covering it right through the final quarter of the year before exhaustion, although that is also a reflection of the catastrophe loss activity suffered last year.

We’ll bring you news on Travelers renewed aggregate reinsurance treaty for 2022 later today. Spoiler, its a smaller cover than last year, reflecting market conditions. Update: Read our article on the renewal here.

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