The Hartford raised top of reinsurance tower with latest catastrophe bond

US primary property and casualty insurer The Hartford achieved its goals of adding secure and diversified reinsurance capacity with its latest $200 million Foundation Re IV Ltd. (Series 2023-1) catastrophe bond, which Chief Financial Officer Beth Bombara said helped to raise the top of its reinsurance tower.

Overall, CFO Bombara said that The Hartford was pleased with its reinsurance renewal placements and their terms and conditions.

In fact, the company believes it achieved a roughly 5% risk adjusted decrease in the cost of its core per-occurrence catastrophe reinsurance protection.

Bombara said this, “compares favorably with the overall market and speaks to the quality of our book of business, strong reinsurer relationships and favorable experience.”

One notable change was a $50 million increase in the attachment for the lowest layers of The Hartford’s per-occurrence property catastrophe reinsurance treaty.

The treaty now provides 40% cover for losses between $200 million and $350 million, from events other other than earthquakes and named hurricanes or tropical storms, but that is down from 60% coverage over a $200 million layer attaching at $150 million a year ago.

Above that, The Hartford has 75% coverage for losses from all perils across a $150 million layer attaching at $350 million.

While above that there is 90% coverage from $500 million up to $1.2 billion, which represents an increased layer, from $600 million to $700 million, over the prior year.

Some minor changes were made to the treaty, the CFO explained, in order to provide “coverage for certain loss events under $350 million,” but overall the structure of The Hartford’s property cat reinsurance program did not change significantly, Bombara said.

One of those changes was an extension to the top of The Hartford’s reinsurance tower, something that the insurer achieved with the help of its new Foundation Re IV catastrophe bond.

“We secured another $300 million layer on top of our program through a combination of traditional reinsurance and sponsorship of a catastrophe bond,” CFO Bombara said.

“The addition of cat bond protection furthers our goal of securing diversified, strongly rated protection that affords durability in both cost and availability.”

She added that, “The majority of our occurrence protection is secured on a multiyear basis,” and said that “As of January 1st, we have protection up to a gross loss event of $1.4 billion.”

The Foundation Re IV 2023-1 catastrophe bond provides 66.67% coverage across a $300 million layer that attaches in excess of $1.1 billion of per-occurrence losses for the company.

The Hartford also renewed its aggregate catastrophe reinsurance treaty, which provides for $200 million of losses to be covered above a retention of $750 million, on which the CFO also said the insurer experienced “favorable pricing from a risk-adjusted perspective.”

Bombara went on to say that the changes to the reinsurance arrangements ensure consistent protection despite growth in property writings at The Hartford.

You can read all about the Foundation Re IV Ltd. (Series 2023-1) cat bond transaction in our Deal Directory, where you can analyse details of almost every catastrophe bond ever issued.