RLI Corp expands catastrophe reinsurance to support property growth

RLI Corporation, a traditional specialty insurance and reinsurance company, has expanded its property underwriting in recent quarters, as it seeks to grow into this firming marketplace, driving a need for more catastrophe reinsurance.

RLI expanded its property underwriting in 2021, writing almost $348 million of gross premiums across the year, an almost 30% increase from the almost $269 million of property risks premiums underwritten in 2020.

In the fourth-quarter of 2021, RLI continued to expand its property book, as rates continued to rise and the insurers COO Jen Klobnak explained that this growth now means changes to the way the company manages its risk.

RLI found Q4 catastrophe losses were lower for the company, driving improved performance of the property book.

Klobnak explained during the insurers earnings call this week, “Turning to property, this segment drove the difference in our results due to the lack of catastrophe losses in the fourth quarter of 2021, compared to the prior fourth-quarter.

“The segment produced a 69% combined ratio and grew by 23%. Rates were up 7% for the quarter.

“The market in this segment continues to be challenged by losses, which we believe will support continued rate increases. Competitors are selling shorter limits than in the past, which creates room for us to participate as the insurance seller.”

She went on to explain that on the excess and surplus lines side, the growth was even more impressive, with RLI expanding its E&S property book by 34% in Q4.

“We realised increased rates, witnessed rising building valuations and saw reduced capacity from our MGA and carrier competitors. All of these changes improve our opportunity in this space and all products in this segment saw an increase in submissions this quarter and for the full-year. All of these products also contributed to the 29% growth in premium for the year,” Klobnak said.

With all of this inward property lines growth, RLI has found it needs to manage the risk on the outwards side as well.

Klobnak said, “To support property’s growth, we purchased $100 million of additional catastrophe reinsurance limit effective January 1st.”

She added that at the January renewals, RLI renewed its reinsurance treaties in a structure largely the same as prior years.

Renewal rates for RLI’s reinsurance program rose by mid-single digits, she said, but added, “We have made active use of reinsurance in the last couple of years, so we expected to see these cost increases.”

On the casualty side, Klobnak said that reinsurance renewal rates were also up 5% to 10%.

So RLI Corporation is another example of a company growing on the inwards side and expanding its outwards reinsurance to support that and to manage possible losses across its expanding property book.

These pockets of new demand have been well-received by reinsurers and ILS fund managers, as by supporting carriers to grow their business these programs can continue to grow and provide long-term sources of risk-linked returns, for those that write them.