US primary insurance giant Travelers has reported an elevated level of catastrophe losses for the first-quarter of 2023, which may set the tone for primary carriers in the country, as some may face a burden due to severe convective storms, tornado and typically higher reinsurance attachment points.
Travelers said that the “elevated level” of catastrophe losses amounted to $535 million pre-tax, or $422 million after-tax, for the first-quarter of this year.
That’s a significant increase on the $160 million of catastrophe losses experienced in the prior year period.
The catastrophe losses added 6 points to Travelers combined ratio for Q1, taking it to 95.4%, up from 91.3% in the prior year.
Travelers explained that the catastrophe losses it experienced in Q1 2023 came primarily from severe wind and hail storms in multiple states.
On the back of these catastrophe losses, Travelers personal lines segment fell to an underwriting loss, with a combined ratio of 101.5% for the quarter.
As we’ve reported recently, US severe and convective weather losses are expected to be above average for the first-quarter of 2023, potentially developing to record levels.
At the same time, primary insurers generally have higher reinsurance attachments now and aggregate reinsurance coverage has typically shrunk, meaning they are often more exposed to these kinds of events.
For Travelers, at its most recent reinsurance renewal at the start of this year, the carriers’ occurrence catastrophe excess-of-loss (XoL) reinsurance treaty renewed at a higher attachment point and it did not renew its aggregate catastrophe reinsurance cover.
To be clear, these aren’t the kind of losses where Travelers occurrence reinsurance would have attached, it is set for much larger loss events.
But, it illustrates the point and smaller insurers have commensurately higher attachments as well, making the elevated catastrophe losses perhaps more of a burden for the primary market, less of a burden for reinsurance and ILS.
Also read, from this morning: Rising reinsurance attachments to constrain Q1 cat losses: KBW.
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