Selective added $216m of collateralized limit at reinsurance renewals

Selective Insurance Group renewed its catastrophe reinsurance tower at 1/1 2023 and this year secured $216 million of fully collateralized limit, the majority of which sits in the top-layer of the program.

We are told there has been some ILS capital participation within that top-layer of Selective’s 2023 catastrophe reinsurance tower, as there had been in previous years although sometimes also occupying layers lower down as well.

The 2023 property catastrophe reinsurance tower extends up to $915 million of coverage for Selective Insurance, excess of a $60 million retention.

That retention rose from $40 million in the prior year, we understand, which is typical of renewals at January 2023, when most cedents saw pressure from markets to increase the retention at the bottom of their towers.

Out of the tower, $810 million of net property catastrophe reinsurance limits were purchased, with the remainder a co-participation in the risk running alongside each layer, we’re told.

Which means that the collateralized portion of the property cat reinsurance tower makes up more than one quarter of the total limit placed at January 1st 2023 for Selective.

Interestingly, on the retention, Selective executives revealed that this is the first time the carriers retention has risen above $40 million since at least 2006, with that $40 million retention having been a feature at the bottom of its catastrophe reinsurance tower since that year.

Which drives home just how challenging the renewals were this year, if long-standing retention features were hiked by 50%, such as in this case.

Selective’s increased limit at the top of its reinsurance tower was required due to exposure growth, so the company has turned to collateralized protection as a way to fill out that upper-tier and extend the tower for 2023.

In 2022, Selective’s catastrophe reinsurance tower only extended to $835 million, excess of the $40 million retention.