Travelers expands aggregate reinsurance, but lifts attachment at Jan renewal

U.S. primary insurance carrier Travelers has successfully renewed its aggregate catastrophe reinsurance treaty at the January 2021 renewal season, with the layer set to provide it with slightly more coverage than last year but at a higher attachment point.

As a reminder, Travelers had made a full $280 million recovery from its property catastrophe aggregate reinsurance during the third-quarter of 2020, after severe weather and hurricanes ate through the layer of protection the insurer had.

The aggregate property catastrophe reinsurance treaty was first introduced to Travelers program in early 2019, when the company added a $500 million aggregate property catastrophe excess of loss treaty at the January 2019 renewals.

The 2019 aggregate catastrophe reinsurance treaty was structured across a $500 million layer of coverage in excess of an attachment of $1.3 billion, with reinsurance covering 86% or $430 million of that layer and Travelers only retaining the other 14% or $70 million.

For 2020 the amount of coverage was reduced, as the still $500 million layer of aggregate reinsurance protection only attached at $1.55 billion of losses to Travelers and reinsurers only covered 56% of this, or $280 million, while Travelers will retained the other 44% or $220 million.

After a full recovery on the aggregate treaty in 2020 and facing higher reinsurance pricing at this renewals, you might have thought Travelers would have down-sized, or left the aggregate treaty the same.

But, for 2021, Travelers has upsized on the aggregate catastrophe reinsurance protection it receives again, with the renewed treaty set to cover 70% of the $500 million layer, so $350 million of coverage and a $150 million retention.

Once again, the aggregate reinsurance treaty covers qualifying losses from PCS-designated catastrophe events in North America in excess of $5 million per catastrophe event, up to a maximum of $250 million per-event.

But this year, and this is where Travelers has adjusted the aggregate treaty for 2021, the attachment for the coverage has been lifted much higher to $1.9 billion.

Travelers has also renewed its main $2 billion corporate catastrophe excess-of-loss reinsurance treaty at the January 2021 renewals, at the same coverage terms as the prior year.

This corporate catastrophe reinsurance treaty remains structured to attach at $3 billion of losses and Travelers is covered for 75% of losses across the $2 billion layer above it. Hence 75%, or $1.5 billion of losses are reinsured, while the other 25% or $500 million are retained by the insurer.

So Travelers enters 2021 still with the same amount of occurrence protection from its calendar year XoL treaty, as well as more aggregate reinsurance protection from the January renewed aggregate reinsurance treaty arrangement, albeit at a higher attachment point for this year.

Travelers has a range of other reinsurance treaties that are all either up for renewal around the mid-year 2021 or remain in-force beyond that date, including its $500 million Long Point Re III Ltd. (Series 2018-1) that matures in 2022.

Travelers reported its fourth-quarter and full-year results today, revealing strong results, which you can read about in more detail over at our sister publication Reinsurance News.