Travelers reports 33% rise in Q1 cat losses amid continued US wind and hail activity – Artemis.bm
US primary insurer Travelers recorded catastrophe losses, net of reinsurance, of $712 million in the first quarter of 2024, up 33% year-on-year as a result of continued severe wind and hail activity across parts of the US, the company announced today.
Travelers has reported that Q1 2024 pre-tax catastrophe losses of $712 million rose by $177 million on the $535 million recorded in Q1 2023.
In the first quarter of 2024, the catastrophe losses added 7.1 points to the combined ratio compared with Q1 2023 cat losses adding 6 points.
Despite this, Travelers reports that its combined ratio still improved by 1.5 points to 93.9% for Q1 2024, driven by an improvement in the underlying combined ratio of 2.9 points to 87.7%, partially offset by the elevated cat experience and slightly lower net favourable prior year reserve development.
Travelers attributes the rise in catastrophe losses to “severe wind and hail storms in the central and eastern regions of the United States.”
On the back of a record setting year for severe convective storm activity in the US in 2023, wind and hail storms have continued to batter parts of the US so far this year, with recent reports pegging insured losses from these events in the US alone at more than $10 billion, accounting for more than half of global Q1 2024 insured nat cat losses.
On top of this, it’s understood that reinsurers have held firm at renewals and maintained the changes to terms and conditions achieved in 2023, including higher reinsurance attachment points. As a result of this, and the move away from aggregate coverages by reinsurers, primary insurers that operate in the US are now retaining more of these types of losses.
At its January 2023 reinsurance renewal, Travelers’ main per-occurrence treaty saw a big uplift in attachment point, and this was maintained at the January 2024 renewal, when the insurer also increased the amount of protection it receives under its occurrence catastrophe excess-of-loss (XoL) treaty to provide $3.525 billion of cover. This year, as in 2023, the firm also decided to non-renew its aggregate catastrophe reinsurance coverage.
Given the $3.5 billion attachment point on the company’s core per-occurrence reinsurance treaty, these Q1 2024 cat losses, while elevated, aren’t the type of losses that would result in the reinsurance attaching, as it’s designed for bigger events.
However, it does again suggest that with these frequency type losses now back on primary insurer balance sheets, the active storm and hail conditions in the US so far in 2024 could lead to a more challenging cat experience for the primary market.
