As anticipated, U.S. primary insurance carrier Travelers has confirmed that it made the full $280 million of recoveries from its property catastrophe aggregate reinsurance during the third-quarter of 2020.
Travelers had already come very close to triggering the property aggregate catastrophe reinsurance cover after the second-quarter of the year, when it reported $854 million of catastrophe losses pre-tax for Q2.
That took its total reported pre-tax and net of reinsurance catastrophe losses to $1.187 billion for the first-half.
Travelers renewed 2020 aggregate cover sees it retaining much more of its losses than the prior year, with the $500 million layer of aggregate reinsurance protection attaching at $1.55 billion of losses to Travelers, but with reinsurers only bearing 56% of this or $280 million for 2020, while Travelers will now retain the other 44% or $220 million.
Travelers had reached $1.4 billion of qualifying catastrophe losses by June 30th, so the fact this treaty has been triggered is no surprise given the catastrophe loss activity in the United States in Q3.
The third-quarter has also been costly, with the company reporting $397 million of pre-tax catastrophe losses net of reinsurance, well above the average for the period.
Travelers CEO Alan Schnitzer commented that, “We are pleased to report third quarter core income of $798 million and core return on equity of 13.5%, despite catastrophe losses that were well above the 10-year average for the third quarter.”
The insurers catastrophe losses for Q3 2020 primarily resulted from the Derecho windstorm in the midwestern region of the United States, the Glass wildfire in California, Tropical Storm Isaias, Hurricane Laura and additional wildfires in the western United States, Travelers said.
But yet again, Travelers reinsurance program has assisted, reducing the impact significantly thanks to this aggregate layer triggering and fully paying out to the benefit of the insurance carrier.
Travelers said that its third-quarter catastrophe losses were “reduced by the full $280 million of recoveries available under the Company’s Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.”
Travelers renews its catastrophe aggregate coverage at the January renewals typically, so it will be interesting to see how it structures this important protection for the next year.