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Global reinsurance company Hannover Re expects that the current “high levels” seen in the reinsurance industry can be sustained and it does not expect much change at upcoming renewals.

In announcing its first-quarter results today, Hannover Re also revealed that, thanks to a more benign quarter of natural catastrophe losses the company did not share any of its major losses with insurance-linked securities (ILS) investors during the period.

Hannover Re reported that its group net income rose by 15% to EUR 558 million in Q1 2024, while its reinsurance revenue rose to EUR 6.7 billion.

As a result, return on equity reached 21.3%, which was well-above the target of 14% set under the reinsurance firm’s strategy.

In property and casualty reinsurance, Hannover Re’s combined ratio came down from 92.3% a year ago, to just 88% for Q1 2024, which is below the full-year target of 89%.

As a result, major losses fell well within budget for the quarter and the natural catastrophe experience was not significant to Hannover Re’s business.

“We can look back on a rather benign quarter as regards large losses. We had a good start into the year, putting us on track to achieve our full-year profit target,” Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re commented. “At the same time, with the recent treaty renewals we have put in place a solid foundation for further profitable growth given the continued demand for high-quality and reliable risk protection in what is a challenging landscape.”

In P&C reinsurance, Hannover Re noted some growth in the area of structured transactions and insurance-linked securities (ILS), particularly in EMEA and the Americas.

This is where the reinsurers business that sees it retroceding risk to ILS investors is undertaken, as the company continues to front and transform risk for capital market investors.

Large losses came in at EUR 52 million for the period, although Hannover Re has not put a figure on its loss from the Baltimore Bridge collision, but it has booked the full budget for the quarter anyway, of EUR 378 million, and said that event will be easily covered.

In the quarter, Hannover Re noted a “low retrocession recovery” with no positive impact from the large losses booked, that came in below budget.

Gross large losses were booked at EUR 59 million, net at the aforementioned EUR 52 million, but Hannover Re also noted that the share of loss for ILS investors was zero in the period, as none of the events were severe enough to attach the ILS contracts Hannover Re has facilitated and partnered on.

The Japanese earthquake at the beginning of the year only resulted in a net loss of EUR 25 million, while wildfires in Chile cost EUR 15.8 million. In addition there was an aviation loss at EUR 11.7 million.

Looking to the full-year, Hannover Re expects positive conditions to persist in reinsurance, forecasting that its reinsurance revenue in total business will grow by more than 5% this year, at constant exchange rates, while group net income is forecast to reach at least EUR 2.1 billion.

CEO Henchoz commented on market conditions, saying, “The 1 April renewals provided further confirmation that the market environment has stabilised on a high level after the substantial improvements in prices and conditions recorded in prior years.

“We are optimistic that this level can be sustained in the coming renewals as well. It remains the case that our clients value our quality as a strong partner and our focus on our core expertise, namely reinsurance.”

Hannover Re says reinsurance stabilised at high level, shares no losses with ILS was published by: www.Artemis.bm
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Thanks to the recent successful issuance of its latest catastrophe bond, American Coastal Insurance (AmCoastal) has extended the top exhaustion point of its main catastrophe reinsurance tower to roughly $1.2 billion for 2024, according to CEO Dan Peed.

As Artemis had reported, AmCoastal successfully secured an upsized $200 million Armor Re II Ltd. (Series 2024-1) Florida named storm cat bond in April, finalising the deal with a risk spread within the lower-half of the initial range of price guidance.

The insurer has now disclosed that the catastrophe bond occupies roughly two-thirds of the top-layer of the main AmCoastal catastrophe reinsurance tower for 2024.

During the insurer’s earnings call yesterday, CEO Dan Peed commented on the reinsurance renewal saying, “We have increased our multi-year reinsurance commitments, enhancing stability. Our 2024 catastrophe reinsurance program was marketed with a structure that further protects the balance sheet.”

Adding that, “We have been able to increase the expected exhaustion point with the successful placement of AmCoastal’s multi-year cat bond which was oversubscribed at the lower end of the expected coupon range.”

AmCoastal President Brad Martz went into more detail on the reinsurance tower renewal, explaining, “As of today, we have secured over 90% of the total limit being sought, and the placement is progressing in line with our expectations.”

He said that AmCoastal had three goals when it began planning its reinsurance renewal for the 2024 hurricane season, to increase the overall protection, improve cost efficiency, and maintain similar levels of retention.

“I believe we will achieve all three this year,” Martz said.

“For American Coastal, we are seeking to purchase roughly $265 million more limit from the private market this year, which will stretch our exhaustion point up closer to $1.2 billion, for the 208-year return time compared to the expiring program of 167-year return time as estimated by the AIR hurricane model.

“$200 of the additional open market limit was secured in a new three-year catastrophe bond that closed in April,” he commented.

Martz also noted that AmCoastal’s quota share reinsurance is being reduced from 40% to 20%, which should drive “a material increase in net premiums earned, partially offset by higher net losses, as we retain more of those.”

The goal with the new reinsurance strategy is to “retain more of our gross underwriting margin,” Martz said.

He added that, “We expect to have both towers fully-placed well before June 1st and we will provide more information on the final limits, retentions, and costs, once both programs have been completed.”

You can see the new AmCoastal 2024 reinsurance tower below.

You can read all about AmCoastal’s new Armor Re II Ltd. (Series 2024-1) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.

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Industry loss warranties (ILWs) remain a useful and well-established instrument within the capital management toolbox of risk carriers, but do have their drawbacks, some of which can be mitigated or removed entirely by a parametric structure, according to Skyline Partners.

As parametric insurance, reinsurance, and retrocession structures continue to grow in popularity, Artemis spoke with Laurent Sabatié, Co-founder and Executive Director, and Ken MacDonald, Strategic Advisor of Skyline Partners, a full-service provider in the parametric insurance supply chain.

ILWs are an indexed-based reinsurance instrument which pays out when the estimated total industry-wide insured loss arising from a specific, covered event or group of events exceeds an agreed threshold, as calculated by a third party.

They can be used to cover a dead or live cat event, and Sabatié explained are often purchased by cedants as a back-up cover to protect their balance sheets when multiple sequential events during the same storm season occur or are feared.

But while ILWs are both useful and well-established, Sabatié stressed that they’re certainly not without their limitations, including the issue of basis risk.

“They typically use market-loss data compiled by commercial entities or major reinsurers to determine when an ILW is triggered for payment. This is inherently inconsistent with any specific cedant’s actual value at risk. The inconsistency is exacerbated by reporting gaps which leave total losses underestimated or based on guesswork,” said Sabatié.

“Perhaps worse is the long wait for settlement,” he continued. “ILWs – by design – do not pay until the industry loss has settled, or at least comfortably exceeds the trigger point. The naturally long period required to calculate a reliable industry loss can, in the extreme, be many years. In the interim, the cedant may not be able even to recognise the reinsurance recovery in their P&L.”

Expanding on the limitations and issues surrounding ILWs, MacDonald highlighted both a lack of flexibility and a potential lack of transparency.

“Their structure is very rigid, with trigger conditions that take no account, for example, of variations in risk profiles across portfolios, or the evolving nature of tropical cyclone risk.

“The ILW market operates predominantly as an over-the-counter market, with limited regulatory oversight, and therefore transparency, relative to traditional reinsurance markets,” said MacDonald.

Another negative, according to Sabatié and MacDonald, include the fact the scope of the ILS coverage is limited geographically, as areas not covered by third-party industry loss collation services cannot be covered by ILW instruments.

Further, calculation of total loss is often underestimated because certain types of losses may be excluded from industry loss calculations, explained the pair.

According to Sabatié and MacDonald, the answer to these limitations with ILWs, is the parametric structure, which does share some characteristics with ILWs.

“They too can be index based, but they are triggered for payment when a specified event occurs, with no regard for the total (and irrelevant) industry loss arising from the event. They minimise or eliminate many of the issues associated with ILWs,” said Sabatié.

Starting with the basis risk issue, Sabatié told Artemis that parametric triggers can reduce basis risk as they can be designed to align very closely with the actual damages caused by an event to a specific re/insured portfolio.

“Through pre-event analysis of its exposed values and location coordinates, coverage can be designed to react with precision to relevant events, reducing basis risk substantially compared to ILWs.

“The trigger events – or “parameters” – of the index, and the loss scales created and adopted for a specific coverage contract, can each be calibrated to minimise remaining basis risk. This may apply, for example, to the intensity triggers of the index such as windspeed, days of excess temperature, or the order of the event during a coverage period. Adjustment can be used to ensure triggers align with cedant objectives regarding the attachment and/or exhaustion probability of specific economic loss tranches, as well as budget,” said Sabatié.

Adding, “This alignment ensures triggers match the modelled cat losses used in reinsurance purchasing and capital modelling. The parameters can even be optimised to align with the distribution probability of the cat losses that inform not just the overall reinsurance placement, but also the capital modelling behind it. They are, therefore, fully integrated within the purchaser’s enterprise risk management framework.

“Alignment makes the value of parametric coverage is much greater, because it focusses more accurately on the reinsured’s specific exposures, not those of the entire industry.”

Another benefit of a parametric structure is that claims settlement is extraordinary efficient, with settlement often within a calendar month of the triggering loss event.

“Reduced administrative burdens provide faster, certain access to funds underpinning liquid capital. The beneficial financial impact of parametric reinsurance can be recognised much faster,” said MacDonald.

“Settlement is much simpler than with traditional indemnity-based reinsurance, which may also be said of ILWs, but with parametric reinsurance payments are not delayed while industry-level losses are calculated and left to develop. Nor does inflation decrease the relative value of the recovery while you wait.

“This lightning speed of settlement also benefits reinsurance capital providers by eliminating trapped capital and removing concerns over loss creep,” he continued.

The flexibility of parametric structures, explained Sabatié, means that coverage can be tailored to match the risk, which ensure better pricing as cedants pay solely for protection that matches their exposure precisely.

Additionally, Sabatié noted that coverage is broader than with an ILW, as any type of economic loss with a covered event may be reimbursed by a parametric reinsurance structure, including intangible exposures such as loss of access.

“Parametric triggers are highly flexible and can be tailored to respond to parameters which precisely meet each cedant’s specific needs. Triggers may take into account factors such as geographic location, risk profile, historical incidence, and/or almost anything which can be shown to contribute to loss and quantified. Payment structures can be varied to account for changing values at risk, or future changes of conditions. Risk nuances can therefore be measured more effectively and covered more advantageously. Nor is parametric reinsurance limited to nat cat exposures. It has been used to reinsure perils ranging from cyber to marine cargo,” said Sabatié.

Commenting on some additional, major benefits of a parametric structure, MacDonald explained that, “Parametric reinsurance structures typically operate in well-established regulated markets which ensures greater transparency and oversight relative to ILWs. Insurers can therefore gain access to a broader range of potential counterparties, and benefit from the expertise and financial strength of established reinsurance players. Most of them are already active in parametric.”

He also underlined that regulated parametric products do not rely on uncertain Letters of Credit or unrated capital, which gives cedants reassurance over the reliability and stability of their reinsurance arrangements.

“With lower basis risk, better counterparties, closer alignment with modelled outcomes, and a regulated nature, parametric reinsurance qualifies as Tier 2 Capital under European solvency rules. This is in stark contrast to ILWs which are considered derivative products,” said MacDonald.

“In Parametric vs. ILW, parametric reinsurance wins on transparency, certainty, responsiveness, simplicity, speed of payment, and balance-sheet benefits. Skyline Partners, the parametric catalyser, has everything it takes to get parametric reinsurance structures designed, built, and operational. We work daily with brokers, cedants, captives, and reinsurers alike to deliver the winning parametric advantage,” concluded Sabatié and MacDonald.

It’s important to note that ILW’s and parametrics both play an important role and are well-suited to specific situations, with some protection buyers even using the structures to complement each other within their coverage arrangements.

We suspect both will continue to play these important roles, but as technology advances and use of data becomes increasingly sophisticated, the basis risk associated with them will increasingly be minimised and the structures themselves refined, with their protection honed and improved.

Parametric structures minimise or eliminate limitations of ILWs: Skyline Partners was published by: www.Artemis.bm
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There is zero appetite at reinsurance giant Munich Re to budge on attachment points or weaken any terms and conditions, the firm’s CFO Christoph Jurecka explained today.

As we reported this morning, Munich Re had a very strong first-quarter to 2024 and said that April reinsurance renewals were positive in terms of volumes, but flatter in terms of rates.

The company also said it anticipates positive renewals at the mid-year, despite a recognition that market pressure is rising in the reinsurance space.

Asked during an investor call this morning whether Munich Re expects any pressure on its terms, in particular whether it foresees any decline in reinsurance contract attachment points, the firm’s CFO Christoph Jurecka said there is zero chance.

Instead, the company is hoping for a stable outlook in reinsurance through 2024, on both price and terms.

That means no loosening of underwriting terms and conditions, on which Jurecka was very clear.

In response to an investment analysts question about whether Munich Re would consider reducing attachment points for its clients, Jurecka said, “Lower attachment points, or these kinds of things, is clearly nothing we would want to go into.”

He went on to explain that Munich Re would, “Rather really focus on maintaining the improved terms and conditions and then continuing to write business at the attractive price level, of where we currently are.”

Commenting on the stabilisation of the reinsurance price environment , Jurecka said, “It seems as if we are on a plateau level for 1-1 and 1-4 now, from a pricing perspective, where supply and demand met each other at very reasonable terms.”

Adding that, looking forwards on price expectations for renewals, “I would just assume that continues.”

Jurecka then reiterated the importance of discipline, especially on terms and conditions.

Telling the analyst, “Then again, our appetite to weaken some of our T&C’s. or to be looser on the underwriting side, the appetite is absolutely zero and the discipline needs to be maintained going forward.”

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Global reinsurance giant Munich Re has noted a slight increase in market pressure after the April round of renewals, but believes that the overall market environment will remain positive at the next major reinsurance renewals in July.

In announcing a stellar result for the first-quarter of 2024 this morning, when its business generated an impressive €2.1 billion net result, Munich Re said that it anticipates continued good momentum, helped by positive opportunities to deploy its capacity.

Also assisting in the strong result was a very low combined ratio in property and casualty reinsurance, of just 75.3%, as overall major losses fell year-on-year, helped by a lower level of natural catastrophe loss events in the quarter.

“Munich Re kicked off the new financial year with great momentum. Our Q1 net result this year is nearly 70% higher than in 2023. Every line of business played a role in this impressive performance. In addition, we got a boost from the treaty renewals at 1 April, where we tapped into attractive growth opportunities against a backdrop of continuing high rates. We still expect to generate a profit of €5bn in 2024. In fact, it has become more likely that we will surpass that target,” Christoph Jurecka, CFO of Munich Re explained.

Property-casualty reinsurance generated a net result of €1.336 billion, up strongly from the prior year’s €760 million.

Major losses fell to €650 million, from over one billion euros in the prior year, with man-made major losses rising to €418 million due to the inclusion of the collapse of the Francis Scott Key Bridge in Baltimore, while catastrophe losses fell significantly to €232 million, down from €870 million in the previous year period.

At the latest reinsurance renewals on April 1st 2024, Munich Re grew the volume of business written to €2.6 billion, a 6.1% increase.

The reinsurer said it “exploited the ongoing favourable market conditions to expand attractive business, with growth opportunities being realised particularly in India, Latin America and Europe.”

Price development was stable overall, largely compensating for higher loss estimate trends, Munich Re said.

Interestingly though, Munich Re notes, “market pressure increasing slightly” at the renewals.

This reflects the increased appetite of reinsurers and capital markets players, as well as higher available capacity in the reinsurance market, we expect.

We also suspect this is in part due to higher competition, as reinsurers are keen to maximise their opportunity in the hard market environment, in case softening ensues.

Looking ahead though, it seems Munich Re is not anticipating any significant reversal in market conditions.

The company said, “Munich Re expects the environment to remain positive in the upcoming July renewal round.”

In fact, Munich Re said that it anticipates “sustained advantageous business opportunities in coming quarters,” and as a result says the chance it surpasses its full-year profit guidance of €5 billion has now risen, after the strong start to the year.

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Having already secured its largest ever catastrophe bond issue this year, the Texas Windstorm Insurance Association (TWIA) is now ready to sign lines for its reinsurance renewal, with support secured for the rest of its capacity needs, according to staff and broker Gallagher Re’s executives.

At a Board meeting of the Texas Windstorm Insurance Association (TWIA) today, an update on the reinsurance and funding for 2024 was provided.

Recall that we reported last week that for 2024, TWIA’s funding tower will see catastrophe bonds as the largest component, providing 32% of the funding limit needed to meet the statutory 1-in-100 year probable maximum loss for the coming hurricane season.

TWIA had already sponsored its largest cat bond yet, with the $1.4 billion Alamo Re Ltd. (Series 2024-1) catastrophe bond issued in recent weeks.

In addition, as we reported in our article last week, TWIA had already placed $750 million of the traditional reinsurance limit it requires for 2024 before the end of April.

In total, TWIA needs just over $4 billion of reinsurance and cat bonds in-force for 2024, to meet its statutory funding limit.

The residual market insurer will have $2.1 billion in cat bonds, having $700 million from previous years that are still in-force.

Then, with that $750 million of traditional reinsurance secured, it left around $1.2 billion left to secure.

Progress seems to have been quickly made, as Gallagher Re executives said that support is already secured for that and it’s expected to be finalised imminently.

Alan Cashin, of Gallagher Re told the TWIA Board, “At this point, it’s a June 1st renewal. A large majority of it has been placed, I think we were left with about $1.2 billion in limit that needed to be placed and as of now we have enough support to execute and sign the programme over the next couple of days.”

Cashin added that, “I will work with staff Wednesday and Thursday of this week to finalise the entire programme… We are just over $1.2bn and then we’ll work with staff to sign lines over the next couple of days.”

Bill Dubinsky, of Gallagher Securities, provided some colour on the largest cat bond issuance TWIA has ever sponsored.

Dubinsky explained that, “To get to the $4 billion figure we increased the total amount of cat bonds by $900 million, so there were $1.4 billion placed this year.”

Dubsinsky went on to discuss the overall reinsurance tower that TWIA will have in-force for the 2024 Atlantic hurricane season.

He explained that, “The whole structure that you see here is designed to both access reinsurance capacity and cat bond capacity on a differentiated basis, to get to reinsurers as well as investors who have different risk-return appetites.

“That really was something that hadn’t been done as much in the past on the cat bond side, but was really key in getting to that $1.4 billion structure.”

TWIA has been directly sponsoring catastrophe bonds since 2014 and now sits as one of the largest sponsors in our cat bond market sponsors leaderboard.

You can read about all of TWIA’s Alamo Re catastrophe bonds it has ever sponsored in the Artemis Deal Directory.

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For 2024, the funding tower of residual market insurer the Texas Windstorm Insurance Association (TWIA) will see catastrophe bonds as its largest component, providing 32% of the funding limit needed to meet the statutory 1-in-100 year probable maximum loss for the coming hurricane season.

Recall that, back in February the Board of the Texas Windstorm Insurance Association (TWIA) approved a 1-in-100 year PML for 2024 funding purposes at a new high of $6.5 billion, meaning the insurer of last resort needs just over $4 billion in reinsurance limit for the 2024 wind season.

Already TWIA has been making rapid progress in securing that, helped enormously by the catastrophe bond market.

TWIA will have $700 million in catastrophe bond limit from prior year issues that rolls forwards to provide cover through the 2024 hurricane season.

These outstanding cat bonds have also been repositioned within TWIA’s funding tower for 2024, to make most efficient use of their coverage alongside newly placed cat bonds and reinsurance that will be bought.

The insurer added its largest cat bond yet to the funding tower, in the recently completed $1.4 billion Alamo Re Ltd. (Series 2024-1) catastrophe bond that we have been covering in recent weeks.

In addition to that $2.1 billion of cat bond protection, TWIA will be out in the traditional reinsurance market to secure $1.95 billion in cover as well, before June 1st.

It’s now come to light that TWIA had already placed $750 million of that traditional reinsurance limit before the end of April.

The expectation is that the rest of the needed limit will be secured well in advance of the end of May.

Once all the new reinsurance is secured, the $2.1 billion of catastrophe bonds will make up the largest component of TWIA’s funding for 2024, at 32% of the $6.5 billion.

After that, $2 billion of member assessments and public securities will contribute 31% of funding between them, then the $1.95 billion of traditional reinsurance (some of which could come from collateralized or fronted ILS market sources, we expect) will make up another 30% of funding, and lastly a 7% contribution from the CRTF (catastrophe reserve trust fund).

You can see TWIA’s funding and reinsurance tower for 2024 below, including the positioning of its catastrophe bonds and traditional reinsurance layers:

It’s testament to the appetite of the capital markets to support TWIA’s reinsurance needs that it is catastrophe bonds that now make up the largest share of its funding needs.

TWIA has been directly sponsoring catastrophe bonds since 2014 and now sits as one of the largest sponsors in our cat bond market sponsors leaderboard.

You can read about all of TWIA’s Alamo Re catastrophe bonds it has ever sponsored in the Artemis Deal Directory.

At $2.1bn, cat bonds will be TWIA’s biggest source of funding for 2024 was published by: www.Artemis.bm
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Allstate has significantly lifted the top of its Nationwide excess catastrophe reinsurance tower to just over $7.9 billion, which is almost a $1 billion increase from the prior year and catastrophe bonds are filling out much of the upper-layers.

Catastrophe bonds now occupy portions of Allstate’s reinsurance tower from $5.46 billion right the way up to $7.7 billion, with the Sanders Re cat bond program filling out a significant proportion of the upper-layers of the insurers program.

Secured for 2024, the $400 million Sanders Re III Ltd. (Series 2024-1) catastrophe bond issued in January is the most recent ILS market addition and occupies an important slot in the tower, covering 76% of a layer attaching at $5.46 billion and running to almost $6 billion of losses.

Significant new traditional reinsurance purchases have also bulked out the tower and helped Allstate to grow it to the new approaching $8 billion level.

But, at the same time as the top of Allstate’s main nationwide catastrophe reinsurance tower extending by approximately $1 billion, at the other end there is more risk now being retained.

Where as, in 2023, Allstate’s Nationwide Excess Catastrophe Reinsurance Program covered it for losses of up to $6.92 billion after retentions of between $500 million and $750 million, the retentions have now increased.

For 2024, Allstate’s Nationwide catastrophe reinsurance tower provides coverage for loss events up to $7.90 billion, after retentions of $500 million to $1 billion.

Another notable change is that Allstate no longer has aggregate reinsurance coverage that features a franchise deductible.

With the aggregate reinsurance tower solely provided by catastrophe bonds, the old Sanders cat bonds that had a $1 million franchise deductible are no more.

Now, Allstate only has four tranches of cat bonds that provide aggregate reinsurance, but feature a $50 million event deductible instead.

Recall that, we reported recently on the last tranche of aggregate cat bond notes that featured a franchise deductible to reveal that qualifying losses from the risk period that ended March 31st 2024 are now very close to attaching the coverage and so Allstate may benefit from recoveries under that tranche, should loss development continue.

But, that tranche was due to mature anyway, so no longer features in the insurers reinsurance programs from April 1st this year. But it will stay available for any recoveries that can be made, should the aggregate loss tally creep higher and attach the coverage.

Placed in the traditional reinsurance market in 2024 for Allstate were multi-year contracts attaching at the $500 million to $1 billion retentions and providing coverage of up to $4.25 billion, so exhausting at $4.75 billion.

In addition, Allstate placed two eight-year term reinsurance contracts, that provide it $105 million of cover in excess of a minimum $5.25 billion retention and $131 million of cover in excess of a minimum $6.57 billion retention.

Allstate also placed five single-year term reinsurance agreements in 2024 as well, which have a range of attachment and exhaustion points throughout the Nationwide catastrophe reinsurance tower.

You can see how Allstate’s Nationwide reinsurance towers looked at April 1st 2024 below:

Allstate also purchased a Canadian catastrophe reinsurance arrangement at January 2024, providing total coverage of CA$355 million in excess of a CA$75 million retention.

One other notable fact, related to Allstate’s reinsurance arrangements for 2024, is the increased cost associated with its procurement.

While more limit has been secured, the cost of Allstate’s reinsurance has risen faster, it seems.

Allstate said that the total cost of its property catastrophe reinsurance programs, excluding reinstatement premiums, was $286 million in Q1 2024, compared to $219 million in Q1 2023.

In addition, Allstate has disclosed that its reinsurance arrangements cost it $1.02 billion in 2023, which was up significantly from $788 million in 2022.

But, Allstate has been steadily filling out the upper-layers of its reinsurance tower over the last two years, largely with catastrophe bonds, and has now extended it by almost $1 billion, so the increased costs are understandable, along with the effects of the hard reinsurance market.

View details of every catastrophe bond ever sponsored by Allstate here.

Read all of our reinsurance renewals news.

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Heritage Insurance Holdings, Inc. has now finalised its catastrophe excess-of-loss reinsurance renewal for the coming year and the top of its reinsurance tower stretches to $1.3 billion, with increased protection for the southeast US, while shrinking coverage for the northeast US and Hawaii.

Year-on-year, Heritage has shifted its focus on reinsurance protection to the southeast over the northeast it seems, perhaps reflecting stronger growth in states such as Florida this year, and perhaps also a nod to the impending and expected to be active hurricane season.

For 2024, the Heritage reinsurance program provides coverage up to $1.3 billion of losses for the southeast United States, $1.1 billion for the northeast and $750 million for Hawaii.

That compares to a 2023 reinsurance renewal that provided $1.3 billion for the Northeast, $1.1 billion for the Southeast and $870 million in Hawaii.

The all indemnity based, catastrophe excess-of-loss reinsurance program for 2024, covers subsidiaries Heritage Property Casualty Insurance Company, Narragansett Bay Insurance Company and Zephyr Insurance Company for the year to end of May 2025.

This year, Heritage has more in-force catastrophe bond cover that assists it through the multi-year protection and terms they offer.

That said, the total consolidated cost of the Heritage reinsurance program for 2024 is reported to be slightly higher year-on-year at $422.3 million, compared to the $420.5 million paid a year earlier.

But, it’s notable that one change to the tower was that Heritage replaced a $70 million chunk of reinsurance that came from the Florida Reinsurance to Assist Policyholders (RAP) program in 2023, with private market coverage in 2024. So the slight increase in cost is perhaps lower than might have been anticipated with that in mind.

“We are delighted to announce the successful completion of our 2024-2025 catastrophe excess of loss reinsurance program,” explained Heritage CEO Ernie Garateix. “We value the unwavering support of our valued long-term reinsurance partners as well as new reinsurance partners and reaffirm our commitment to provide appropriate coverage for the markets we serve.

“I’m pleased to continue to place a portion of our program through capital markets using catastrophe bonds issued by Citrus Re, which provides multi-year reinsurance coverage.”

Heritage has $435 million of outstanding catastrophe bond backed reinsurance, which provides multi-year, layered protection and so assists the company when it comes to renewals, given the certainty on price and coverage terms that provides.

Heritage most recently added $100 million of named storm reinsurance for southeast states through a Citrus Re Ltd. (Series 2024-1) transaction issued in March 2024.

The carrier also has $120 million of northeast only named storm reinsurance limit and a shared $115 million of northeast and Hawaii named storm limit through its May 2023 issuance Citrus Re Ltd. (Series 2023-1).

In addition, $100 million of northeast only reinsurance from the Citrus Re Ltd. (Series 2022-1) cat bond is also available for the coming hurricane season.

The retention on the Heritage reinsurance program is approximately $40 million for the southeast and Hawaii and $32 million for the northeast for 2024, with the northeast up slightly from the $30 million retention it had a year ago.

Once again, Heritage can use its captive reinsurance vehicle Osprey Re to buy-down the retention and expand the program coverage as well.

In terms of the state backed reinsurance, Heritage opted for a 90% Florida Hurricane Catastrophe Fund participation, which was consistent with the prior year.

As Heritage continues on its expansion plan, to become an increasingly super-regional property and casualty insurance carrier, it’s encouraging to see the company continuing to place the catastrophe bond market at the heart of its reinsurance arrangements and we should expect more cat bonds to be sponsored next year, particularly with its 2022 issuance set to mature prior to the 2025 hurricane season.

You can read about every catastrophe bond Heritage has ever sponsored in the Artemis Deal Directory, where you can filter the list by sponsor.

Heritage lifts southeast reinsurance tower to $1.3bn, cat bonds assist was published by: www.Artemis.bm
Our catastrophe bond deal directory
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