Travelers Is Very Happy With The Risks Its Not Taking
Whether it’s reinsurance exposure or Florida property, Travelers is finding profits by scaling back its risk.
Continuing it long standing argument that it has a “strategic approach to underwriting for catastrophes,” Travelers executives told investors that their exposure to Hurricane Ian losses remains manageable and are not accumulating beyond its modeled expectations.
Traveler’s reported $512 million of pretax catastrophe losses during the third quarter, with $326 million related to Hurricane Ian. The majority of the catastrophe charges for the quarter were in personal lines, which represented $285 million and were primarily focused on auto claims, the insurer stated.
“While there is always the potential for us to have outsized exposure to an event, those efforts contributed to losses for us from Hurricane Ian, that based on current estimates, are favorable relative to our corresponding market share,” Travelers CEO Alan Schnitzer said on last week’s earnings call, adding that the losses were consistent with its 5 year push to lower its market share in catastrophe exposed markets.
“Our capabilities position us well for a trend of increasing frequency and severity of losses from natural catastrophes,” he said.
CFO Daniel Frey added that Traveler’s intentional pull back from catastrophe risks in high risk markets was being fueled by its internal, strategic choices.
“The investments we've made in talent, technology and sophisticated peril-by-peril modeling are paying off in terms of risk selection, pricing segmentation, risk mitigation and our industry-leading claim response capabilities,” Frey said.
Executive also remain upbeat about Travelers' reinsurance prospects. To date, and including Hurricane Ian, the carrier has accumulated $1.4 billion of qualifying losses toward the aggregate retention of its $2 billion property aggregate catastrophe excess of loss reinsurance treaty.
Travelers also says it does not expect to be pounded by reinsurers during January renewals, despite market chatter of higher prices and increase limits.
“First, as a disciplined gross line underwriter, we just don't buy that much reinsurance compared to many others; second, we have a long track record of strong underwriting performance, consistently outperforming the industry,” Frey said, arguing that he expects the carrier to get “reinsurance coverage we need at acceptable prices.”
“Also, because we're less reliant on reinsurance, we should be less affected by price increases and capacity constraints. With less of an impact on our cost structure, we should have the option to expand our margin advantage or to reflect that cost advantage in our pricing, making us more competitive for attractive new business opportunities,” he said.
Risk Market News Newsletter
Join the newsletter to receive the latest updates in your inbox.