Progressive reports elevated cat loss on severe weather
Property and auto-focused insurance group Progressive has suffered a relatively heavy catastrophe loss toll in March, as the impacts of US severe convective storms and tornadoes affected the company.
The impact of the severe weather across the United States in March has driven Progressive to miss analysts loss ratio targets, with an elevated catastrophe loss burden and this may have eroded some of the aggregate reinsurance deductible the insurer has in place.
Progressive’s property insurance business bore the brunt of the impacts, reporting a net catastrophe loss ratio of 47.7% and a loss and LAE ratio of 106.6% for March 2022, driving a combined ratio for that segment of 134.7% for the month on the back of the severe weather activity.
The company-wide combined ratio came out at 97.2% for the month.
Progressive said that its March catastrophe losses were primarily related to thunderstorms, hail, and tornadoes in the US.
For its property insurance business, Progressive has a large reinsurance tower in place to help it deal with catastrophe losses.
But, on the occurrence excess of loss reinsurance side, where it has $1.74 billion of cover for a catastrophe event outside Florida, Progressive’s retention is $200 million and it seems unlikely any single severe weather event in March would have got close to breaching that.
But Progressive also has annual aggregate reinsurance in-force, that it renewed in January 2022.
The aggregate cover has two layers, but each only has a $2 million per-event deductible, meaning it is very likely aggregate erosion has occurred with March’s storm activity.
However, the aggregate tower only attaches at $575 million of losses over the annual period, so Progressive will still be a long way off tapping that protection at this early stage of the year.