Progressive’s aggregate reinsurance recovery grows on September losses
US insurance giant Progressive has now begun to record reinsurance recoveries under its aggregate catastrophe reinsurance arrangements, as the company had forecast was likely to occur.
Back in early August we reported that Progressive expected losses would trigger recoveries under its aggregate catastrophe reinsurance coverage in the third-quarter of the year.
Severe weather events had eroded the retention under the aggregate reinsurance protection considerably, leading the insurer to believe recoveries would start in September.
It now transpires that reinsurance recoveries likely started sooner than Progressive had anticipated.
Progressive had secured a new aggregate excess of loss reinsurance contract for 2023, providing multiple layers of coverage.
The first retention layer threshold ranges from $500 million to $575 million, excluding named tropical storms and hurricanes, and a second retention layer has a threshold of $600 million, which includes named tropical storms and hurricanes.
The first and second layers of the aggregate reinsurance provide coverage up to $100 million and $85 million, respectively.
In reporting its monthly results for September, Progressive revealed, “In September, we recorded a reinsurance recoverable of approximately $21 million.”
Suggesting that aggregate recoveries started before Q3, the insurer also added that this brings, “year-to-date recoverable to approximately $23 million, under our 2023 catastrophe aggregate excess of loss reinsurance program.”
Suggesting $2 million was recovered in August as well.
Progressive further explained, “The catastrophe losses and associated allocated loss adjustment expenses (ALAE) in the Property business exceeded the first layer annual retention thresholds, ranging from $500 million to $575 million, under these agreements. The recoverable had a 9.5 favorable point impact on the Property net catastrophe loss ratio for the month.”
By the end of September, Progressive’s net catastrophe loss ratio had reached 36.2% for its property insurance business.
As we reported a week ago, Progressive continues to adjust its exposure in response to volatility it has suffered, with its latest move being an exit from some property insurance business in Florida.
