Executives from US insurance giant Progressive, the owner of catastrophe bond sponsor ARX Holding and American Strategic Insurance Group, have explained that these cat bonds are helping it to maintain reinsurance stability in a challenging market environment.
With reinsurance market conditions seemingly deteriorating as the January renewals approach, there are already some concerns about the availability and cost of reinsurance capacity for the mid-year 2023 renewal season.
As a result, Progressive, like some other carriers, has been keen to highlight the importance of multi-year reinsurance, in helping deliver better predictability in cover available and in keeping prices down for its renewals.
Speaking recently Dave Pratt, General Manager, Property Insurance at Progressive highlighted the importance of consistency.
Saying, “We have a long, continuous stable trading relationship with lot’s of big reinsurance providers.”
Adding, “We try to be very transparent with them about our results and our business plans and so we feel confident that we’ll continue to have access to the reinsurance that we need. We believe that we get favourable pricing based on that transparency.
“It does seem likely that costs will go up next year, and we will pass those through in our rate filings, as quickly as we can, to make sure they’re accurately reflected in our prices.”
Chief Executive Officer of Progressive, Tricia Griffith, added, “I will say that, with reinsurance costs, we are able to pass that on, so that is one benefit.
Also saying on reinsurance, “But clearly, that market is hardening.”
John Sauerland, Chief Financial Officer at Progressive, commented on multi-year reinsurance and how that helps the insurance group in planning and also offsetting the increased pricing, as not all of the program has to be renewed at once.
“We have some multi-year agreements, so our entire program is normally not up for renewal in any given year, which helps us mitigate the impact of increases and allows us to better put those increases into our primary prices.”
This is where Sauerland went on to highlight the way catastrophe bonds assist Progressive in its reinsurance planning.
Saying that, “We do also use some insurance-linked securities, if you will, so cat bonds.
“We’re trying to diversify our reinsurance and catastrophe coverage program, both for time and for the instruments we use, to ensure that we are stable as possible.”
These provide layered and staggered maturity, multi-year catastrophe reinsurance coverage to the company, helping it to better manage its reinsurance and providing some price stability in this hardening and uncertain market, which could be very important later this year at renewals.
The company was recently back in the market securing a $135 million Bonanza Re cat bond transaction that provides additional catastrophe reinsurance through 2023 and beyond.
Progressive says cat bonds help it maintain reinsurance stability was published by: www.Artemis.bm
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