U.S. insurer Travelers enhanced its casualty reinsurance program at the January 1st, 2025, renewals, purchasing more protection at a lower attachment point on the back of strong interest from the market, confirmed Dan Frey, the firm’s Chief Financial Officer (CFO).
Travelers released a very strong set of results for the fourth quarter and full year 2024 this week, posting an improved underwriting gain despite a rise in cat losses for both periods, as favourable net prior year reserve development increased, driven in part by better than expected loss experience in workers’ comp for multiple accident years.
In fact, net favourable prior year reserve development occurred in all business segments, and despite being partially offset by some additions in certain lines, group-wide, increased by $130 million to $262 million for the quarter, and by $566 million to $790 million for full year 2024.
The property and casualty insurer also achieved solid premium growth in 2024, reporting a 7% rise in net premiums written to $10.7 billion for Q4’24, and growth of 8% for the full year to $43.4 billion.
Given the size of its book, Travelers has comprehensive reinsurance protection for both its catastrophe and casualty businesses, both of which were renewed at the firm’s January 1st renewal.
During the insurer’s earnings call on Wednesday, CFO Frey revealed that as part of the carrier’s January renewal, it “enhanced” its casualty reinsurance treaty for 2025.
“Thanks to the reinsurance market’s receptivity to our casualty book, we were able to purchase more coverage at a lower attachment point on a roughly margin-neutral basis,” said Frey.
“I’d point this out to make you aware that the incremental ceded premium related to the additional coverage will impact the growth rate of consolidated net written premium for full year 2025 by a little less than 0.5 points because the written ceded premium impact all hits business insurance in the first quarter. The impact on net written premium growth in Q1 for the BI segment will be about 4 points or about 2 points on a consolidated basis,” he continued.
Later in the call, executives were questioned on the decision to increase the reinsurance protection on the casualty book, specifically whether it was driven by growth.
“I would say the changes we made; we made because we could,” said Chief Executive Officer, Alan Schnitzer. “And every renewal of every reinsurance treaty, we take a look at our business, we take a look at the reinsurance marketplace and make the best risk-reward decisions we could make. And so, what we were able to achieve for the price we were able to achieve it, we thought made a lot of sense. But I would describe it as ordinary course process and a terrific result.”
January renewal reports from brokers highlight an improving underlying casualty re/insurance marketplace, with some varied outcomes for buyers as caution remains following some significant reserve strengthening from some in 2024 to address adverse development in certain prior underwriting years.
There’s been some questions around the performance of more recent underwriting years, but the fact Travelers was able to secure more reinsurance at a lower attachment point for its casualty book shows that there is appetite from the reinsurance industry.
At the 1.1 renewals, Travelers also renewed its catastrophe excess-of-loss (XoL) reinsurance treaty for 2025, securing slightly more coverage than the prior year’s renewal at a higher retention.
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