Travelers renews $2bn cat XoL treaty, adds $500m aggregate reinsurance

Primary U.S. insurance firm Travelers successfully renewed its $2 billion corporate catastrophe excess of loss reinsurance treaty and added a brand new $500 million aggregate property catastrophe excess of loss treaty at the recent January 2019 renewals.

Major insurers have been increasing their protection buying at the recent renewals and Travelers has focused on additional aggregate reinsurance protection, adding an entirely new aggregate excess of loss treaty for 2019.

The insurer successfully renewed its corporate catastrophe XoL treaty, which provides the firm with reinsurance coverage against losses from certain property events, covering both one or multiple occurrences. Events have to surpass a $100 million deductible before losses begin to qualify under this treaty.

This corporate catastrophe reinsurance layer attaches 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.

The new aggregate reinsurance arrangement sees Travelers focusing on coverage for smaller, frequency type catastrophe loss events.

The property aggregate catastrophe excess of loss reinsurance treaty provides Travelers with coverage for an accumulation of North American loss events that are PCS designated, so identified as an event costing the industry above a certain threshold by Property Claims Services (PCS), that cause Travelers a loss of over $5 million each.

The treaty covers a $500 million layer in excess of $1.3 billion, with reinsurance covering 86% or $430 million of this layer and Travelers retaining the other 14% or $70 million.

In addition, in aggregating up towards the $1.3 billion attachment point for this new aggregate reinsurance cover, individual hurricanes and earthquakes can only contribute a maximum qualifying loss of $250 million per event.

Travelers will have pleased reinsurance and ILS fund interests with this new aggregate layer, providing some new demand for capacity from a well-known and trusted insurer ceding company.

The renewal of the catastrophe XoL treaty and the addition of this new catastrophe aggregate XoL arrangement in January will likely have seen some of the capacity to back the coverage coming from third-party reinsurance capital sources, including ILS funds.

Travelers has a range of other reinsurance treaties that come up for renewal at the mid-year 2019, including its $500 million Long Point Re III Ltd. (Series 2018-1) that it sponsored last year.