Chubb seeking to buy $500mn additional top layer for US Northeast
Chubb is seeking to buy a new $500mn top layer for its property cat program, in a sign that major buyers are returning to the market for additional capacity deemed too difficult to source during the 1 January renewal, this publication can reveal.
Sources told this publication that the additional layer will provide Chubb with protection for the Northeast US only and attaches at a remote level.
The move comes after Chubb rescinded plans to extend its cat reinsurance coverage in late December in the face of a highly dislocated January renewal, in which cedants were flummoxed by a lack of cat capacity and significant year-on-year rate hikes.
During the January 2023 renewal season, Chubb had tested the water for an additional $500mn slug of capacity at the top of its program, the rest of which renews in April.
It was one of multiple US carriers that were expected to grow their treaties in response to higher inflation. Last autumn, multiple carriers were known to be in the market for additional layers of coverage, including Allstate and State Farm, which were seeking an extra $1bn of limit each.
At that point, the market was hoping to see $20bn of additional demand in 2023, equating to roughly 10% of US limits, driven by inflation and a more hawkish view of cat risk.
In the end, however, many cedants chose instead to increase retentions and shift reinsurance towers higher rather than expanding programs overall, and new demand has trickled through the market this year rather than arriving en masse.
While reinsurers have observed that mid-year cat renewal rates were in line with those achieved in January, the market has become much more orderly in terms of the ability to place capacity, in contrast to the late scramble at 1 January.
Chubb’s impending purchase comes after Travelers bought a new layer of $500mn in excess of $1.75bn in the mid-year renewal. The deal provides partial coverage across a $1bn layer expiring at $2.75bn and protects against hurricane or tropical storm risk in the coastal states from Texas to Maine, excluding Florida.
Chubb was contacted for comment.