CEA trims 4.1 earthquake reinsurance purchase after strong 1.1 renewals
The California Earthquake Authority (CEA), billing itself as the United State’s single largest reinsurance buyer, trimmed its limit at the April renewals by some 19% as while consolidating treaties.
The CEA currently sports $1.155 billion in traditional property cat reinsurance treaty dated to the 4.1 renewals, shy of the $1.441 billion in treaty which the CEA previously indicated would mature to that point, a comparison of recently released financial overviews from the insurance group indicated. The CEA consolidated to six April treaties from 12 maturing end-March.
After a strong 1.1, the total risk transfer programme is nonetheless up by a fractional $25 million to $9.08 billion versus previously released levels dated end-2023.
At the 1.1, CEA had purchased $2.57 billion in limit across 7 treaties to replace $2.16 billion from eight maturing treaties, the data indicated.
The programme purchased to date in 2024 may have been quite costly. The cession rate rose by nearly 20 percentage points to 76.5% for a fractional increase in limit that the tower suggested may have attached only fractionally lower, unaudited four month financial data suggested.
In P&L terms for the first four months, written premiums fell by nearly 8%, but reinsurance cessions rose 23% against the prior-year period, leading to a nearly 50% y/y decline in net premiums written.
The CEA had faced an additional $85.5 million in three treaties that were set to expire end-May, but no word yet in the latest meeting documents from June 5.
Next up: two treaties maturing late June for $136 million in limit, three treaties maturing end-July for over $456 million and four treaties expiring end-September for just over $511 million.
The $9.08 billion in risk transfer fills just under half of the CEA's total claims paying capacity of $20.1 billion, coming in above the CEA's $6.1 billion in available capital and topped off by $2.2 billion from revenue bonds, $1 billion from potential policyholder surcharges and a potential $1.7 billion second industry assessment.
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