Catastrophe Risk Tolerance Study - Public disclosures by sector Year-end 2020 - Thought Leadership
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Catastrophe Risk Tolerance Study Public disclosures by sector Year-end 2020 1 Proprietary & Confidential Proprietary & Confidential
Contents Section 1 Overview and Key Findings Section 2 Analysis of Disclosure Data Section 3 Risk Tolerance Metrics Disclosure Section 4 Risk Tolerance Summary 2 Proprietary & Confidential
Section 1:
Overview and Key Findings
3 Proprietary & Confidential
Proprietary & Confidential2010 - 2020 Catastrophe Insured Losses
▪ Insured losses from natural disasters in 2020 reached USD100 billion and were significantly lower than
the record USD157 billion in 2017 but still the 4th highest of the decade
▪ Severe Convective Storm was the costliest peril (USD44 billion), driven by historic U.S. losses; tropical
cyclone (USD27 billion) & wildfire (USD14 billion) had active, but non-record years for the industry
4 Proprietary & ConfidentialCatastrophe Risk Tolerance Study Overview
Composition Disclosure
▪ Includes 88 unique re(insurers) on a global basis that report catastrophe 100% Primary Source Secondary Source
loss information in their financial disclosures 7%
15% 12% 6% 7%
75% 14% 13%
▪ Percentage reporting has been relatively flat over the last few years;
most companies provide catastrophe disclosures on a consistent basis 50%
▪ 85% of the industry disclosed some type of information relating to 73% 76% 77% 78%
69% 68% 69%
catastrophe risk tolerance, which is slightly higher than that of the year- 25%
end 2019 disclosure; the percentage of "primary" source disclosures
increased slightly to 78% 0%
2014 2015 2016 2017 2018 2019 2020
Data Sources 2019 2020 2019 (%) 2020 (%)
Primary 70 69 77% 78%
10K Reports 43 42 47% 48%
Annual Reports 25 25 27% 28%
Investor / Analyst Presentations 2 2 2% 2%
Secondary 6 6 7% 7%
A.M. Best Reports 6 6 7% 7%
Not Disclosed 15 13 16% 15%
Totals 91 88 100% 100%
Note: The following companies were part of the 2019 study but are not included in the 2020 study due to M&A activity: Sirius International Insurance Group Ltd,
Navigators Group, Inc, Third Point Reinsurance Ltd and Protective Insurance corp. The following companies were added to the 2 020 study: Sirius Point. Population
excludes (re)insurers from Medical Professional Liability, Life & Health, Financial / Mortgage Guaranty and Title sectors
5 Proprietary & ConfidentialKey Findings of Catastrophe Risk Tolerance Study
▪ Approximately 85% of companies disclosed risk tolerance or related information, of which 39% of the disclosures were
through PML figures (Net):
Undetermined /
Disclosure Type Percentage Disclosed as Target Disclosed as Actual Not Disclosed Count
PML Figure (Net) 39% 9 25 0 34
As Part of Reinsurance Discussion 39% 0 34 0 34
Other Disclosure Type 8% 1 3 3 7
Undetermined / Not Disclosed 15% 0 0 13 13
Totals 100% 10 62 16 88
▪ Disclosures varied by sector. More than 50% of the disclosures made by Commercial Lines and Reinsurance companies
were through net PML, while reinsurance structure was the most common form of disclosure for Personal and Specialty
Lines
▪ Aon’s post-Katrina risk tolerance study indicates that a catastrophe event can range from 3 – 6% of equity for primary
companies and 12 – 19% of equity for reinsurers before impacting stock price by more than 10%
‒ The average 100yr PML risk tolerance disclosure for primary and reinsurance companies is in-line with Aon’s post-
Katrina study and falls in line with 2017 Harvey, Irma & Maria (HIM) results
6 Proprietary & Confidential2020 “View of Risk” Poll Results
How does your firm obtain analysis on What catastrophe model results form When w as the last time your company
catastrophe exposure? “management view ” of risk? re-evaluated its model selection &
assumptions in determining
Developed in-house “management view ” of cat risk?
model AIR only
License a catastrophe RMS only Within the last 2 years
model
Blend
License multiple models 3 to 5 years ago
Customized
Broker or other advisor Other More than 5 years ago
0% 20% 40% 60% 0% 20% 40% 60% 0% 20% 40% 60%
What probable maximum loss (PML) Other than PML analysis, w hat analysis What “model miss” factors concern you
return period does your company target is used to determine catastrophe the most about your firm’s catastrophe
to protect to w hen determining reinsurance limit? exposure?
catastrophe reinsurance limit?
Climate change
Deterministic events
100 to 150 year Hazard & vulnerability
assumptions
150 to 200 year Exposure Regulatory
accumulations intervention
200 to 250 year
Recast of historical Social inflation
Above 250 year event
0% 20% 40% 60%
0% 20% 40% 60% 0% 20% 40% 60%
7 Proprietary & ConfidentialEvent Studies: Katrina and Harvey, Irma & Maria (HIM)
Typical CRO / CFO risk tolerance questions
▪ What proportion of one year’s earnings can be lost in a single event without an adverse stock price reaction?
▪ What proportion of GAAP equity?
Post-event share price decline best predicted by reported Katrina losses alone, rather than Katrina, Rita and Wilma losses combined
▪ Indicates a greater sensitivity to a single large loss rather than an aggregation of events
▪ (Re)insurers losing less than 10% of shareholder value had Katrina losses in the following ranges, which are consistent with recent PML public
disclosures
Katrina - Cat Loss as % of * HIM - Cat Loss as % of *
Prospective Prospective
Sector Equity Consensus Earnings Equity Consensus Earnings
Primary Insurers 3% to 6% 21% to 34% 3% to 6% 24% to 44%
Reinsurers 12% to 19% 107% to 110% 7.5% to 10% 64% to 81%
HIM observations:
▪ Six primary insurers had more than a 10% drop in stock price, all of which had more than a 6% hit to equity from HIM
– 21 publicly traded insurers traded down more than 10% at some point
– For primary insurers with less than 10% drop in shareholder value, there is an average total cat loss to equity of 3%
▪ Five reinsurers had a loss of more than 10% to shareholder value, with an average total cat loss to equity of 10%
– 11 reinsurers traded down more than 10% at some point
– Reinsurers that did not lose more than 10% of shareholder value had an average total cat loss to equity of 6%
* Show n on a net post-tax basis
8 Proprietary & ConfidentialCatastrophe Risk Tolerance Disclosure Trend Analysis:
Sample Composite PML Target Ranges Post-Tax Detail
Post-Tax Net PML as a Percent of Equity: Primary Insurers
1 in 100yr 1 in 250yr
Count Median Max Count Median Max
2020 12 5% 20% 15 6% 20%
2019 12 6% 18% 16 9% 36%
2018 13 7% 22% 16 10% 32%
Post-Tax Net PML as a Percent of Equity: Reinsurers
1 in 100yr 1 in 250yr
Count Median Max Count Median Max
2020 4 7% 8% 7 10% 20%
2019 5 8% 16% 8 11% 23%
2018 5 8% 15% 8 12% 21%
Note: The composite for 2020 consists of 33 companies across all sectors where definitive (100YR, 200YR or 250YR) PML targets or actuals were disclosed.
There were 35 companies in the 2019 composite, 36 companies in the 2018 composite, 33 companies in the 2017 composite, and 32 companies in the 2016
composite. Where companies reported an actual instead of a target, we assumed the actual was their target. Due to a limited d ataset, results should be used for
informational purposes only. An assumed effective 21% tax rate for insurers and 15% for reinsurers was used by Aon as needed for level setting since some
firms disclosed pre-tax and others post-tax.
*The PMLs analyzed include those specified as all peril and all regions as well as specific peril by specific region
9 Proprietary & ConfidentialCompanies Disclosing 100yr, 200yr and 250yr net PML
PML disclosures varied by sector. The majority of Specialty Lines, Commercial lines and Reinsurance companies disclosed
250-yr net PML figures, whereas Personal lines disclosed mostly 100-yr net PML figures
Personal Commercial
25% 14% 12.1% 11.9% 11.9%
20.0%
20% 12%
8.8% 7.9%
10%
15% 11.9% 8% 5.3% 5.8% 5.8% 5.0%
6% 3.4% 3.7%
10% 6.3% 6.0% 4% 1.5% 1.5% 1.0% 2.0%
5.2% 4.8%
2%
5% 0.7% 0%
0% AIG CB CINF SIGI TRV DLG SIGI TLX AIG CB CINF FFH SIGI HIG TRV
ALL FNHC HCI KINS SAFT AV/ LN IAG AU LN
1:100 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE 1:100 Post-Tax PML/SHE 1:200 Post-Tax 1:250 Post-Tax PML/SHE
PML/SHE
Reinsurance Specialty
25% 20.0% 25%
19.0% 18.2% 19.8% 19.1%
20% 16.5% 17.0%
20% 16.7%
15% 11.4%
9.2% 9.9% 9.6% 8.5% 15%
8.1% 7.9% 8.0%
10% 6.9% 6.5% 8.7%
10% 7.7%
5% 5.5%
0% 5% 2.4%
0.8% 0.8%
MUV2:GY
AXS
SCR.PA
AXS
Y
Y
WTRE
HNRI:GR
HNRI:GR
HNRI:GR
RE
SREN
RE
GLRE
PRE
0%
AFG LR E LN H SX LN AFG AC GL BEZ LN LR E LN PL MR R LI
1:1 00 P ost-Tax PML /SHE 1:2 00 P ost- 1:2 50 P ost-Tax PML /SHE
Tax
1:100 Post-Tax PML/SHE 1:200 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE PML /SHE
10 Proprietary & ConfidentialClimate Change Disclosure Regimes
As part of the effort to combat climate change, corporations are starting to release yearly financial related disclosures rel ating to various
reporting regimes as an effort to provide more transparency behind risk corporations face. This year’s studies examines the n umber of
disclosures from insurance companies for the following regimes:
Task Force on Climate-related
Carbon Disclosure Project Financial Disclosures
CDP is a not-for-profit charity that runs the global disclosure system for investors, The Financial Stability Board established the TCFD to develop recommendations for
companies, cities, states and regions to manage their environmental impacts. more effective climate-related disclosures that could promote more informed
investment, credit, and insurance underwriting decisions.
By scoring companies from A to D-, The CDP guides companiesthrough disclosure
to awareness, management, and finally to leadership. In turn, enable stakeholders to understand better the concentrations of carbon-
related assets in the financial sector and the financial system’s exposures to
Scoring measures, the comprehensiveness of disclosure, awareness and climate-related risks.
management of environmental risks and best practices associated with
environmental leadership, such as setting ambitious and meaningful targets. Our disclosure recommendations are structured around four thematic areas that
represent core elements of how organizations operate:
CDP Ratings Distribution ▪ Governance
▪ Strategy
Rating 2018 2019 2020 ▪ Risk Management
A 2 3 2 ▪ Metrics and Targets
A- 2 5 11 Number of Reports Filed Featuring Companies From This Study
B 8 9 5 Disclosure Regime 2018 2019 2020
B- 1 2 0
C 13 11 7 TCFD 19 26 31
C- 0 0 0 CDP 31 31 30
D 3 0 4 Both 16 21 24
D- 1 1 1
Either 20 15 14
11 Proprietary & ConfidentialSection 2:
Analysis of Disclosure Data
12 Proprietary & Confidential
Proprietary & ConfidentialCatastrophe Risk Tolerance Disclosure Distribution by Sector
Disclosures varied by sector, with Commercial Lines and Reinsurance companies using net PML most often, while
reinsurance structure was the most common form of disclosure for Personal Lines and Specialty Lines
Commercial Lines Sector Personal Lines Sector
6% 7%
4%
Net PML
25%
Net PML
22%
Reinsurance Structure Reinsurance Structure
50%
Other Other
None None
22%
64%
Specialty Lines Sector Reinsurance Sector
26% 30% Net PML 20%
Net PML
Reinsurance Structure
Reinsurance Structure
Other
13% Other
None
67% None
44%
13 Proprietary & ConfidentialRisk Metrics Disclosures
Actual vs. Target PML Aggregate vs. Occurrence
Actual Target
12 30 Aggregate Occurrence Both
10
# Com panies
1 25
8
# Companies
2 4
3 20
6 3
4 9 15
7 14
2 4 5 3
10 15 1
0 7
Commercial Personal Specialty Reinsurance 5 8
6
0 2 3 3
Commercial Personal Specialty Reinsurance
All Peril vs. Regional Disclosure
Actual Target ▪ All carriers (Personal, Commercial, Specialty and Reinsurance)
20 lines are more inclined towards Actual PML
# Companies
15 4 ▪ All company composites predominantly report on an
10 Occurrence basis
5
13 ▪ Actual PMLs are more concentrated towards Specific Peril
5 1 Regional and All Perils Regional disclosures while Target
5 3
2
0 PMLs are featured in both Specific Peril Regional and All Peril
All Perils All Perils Specific Peril Specific Peril All Regions disclosures
Regional All Regions Regional All Regions
We Assume It as Occurrence , If PML Is Disclosed, But Not Specified as Aggregate Or Occurrence.
14 Proprietary & ConfidentialSection 3:
Risk Tolerance Disclosures
15 Proprietary & Confidential
Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
Allianz Group XETRA:ALV Other
American International Group, Inc. NYSE:AIG ✓ ✓ Net PML Pre-Tax Actual Aggregate
Chubb Limited NYSE:CB ✓ ✓ 10yr Net PML Pre-Tax Actual Both
Cincinnati Financial Corporation NASDAQ:CINF ✓ ✓ 50yr, 500yr Net PML Post-Tax Actual Occurrence
CNA Financial Corporation NYSE:CNA Reinsurance Structure Actual Occurrence
Direct Line Insurance Group Plc LSE:DLG ✓ Net PML Pre-Tax Actual Occurrence
Fairfax Financial Holdings Limited TSX:FFH ✓ Net PML Pre-Tax Target Aggregate
Liberty Mutual Holding Company Inc. - Reinsurance Structure Actual Both
MS&AD Insurance Group Holdings, Inc. TSE:8725 Other Actual
Old Republic International Corporation NYSE:ORI None
QBE Insurance Group Limited ASX:QBE Reinsurance Structure Actual Occurrence
25yr, 50yr, 150yr,
Selective Insurance Group, Inc. NASDAQ:SIGI ✓ ✓ ✓ Net PML Post-Tax Actual Occurrence
500yr
Sompo Japan Nipponkoa Holdings, Inc. TSE:8630 Other Actual
Talanx AG XETRA:TLX ✓ Net PML Pre-Tax Actual Occurrence
The Hartford Financial Services Group, Inc. NYSE:HIG ✓ Net PML Pre-Tax Target Occurrence
Tokio Marine Holdings, Inc. TSE:8766 Other Actual
Travelers Companies, Inc. NYSE:TRV ✓ ✓ 50yr, 1000yr Net PML Post-Tax Actual Occurrence
Zurich Insurance Group Ltd. SWX:ZURN Reinsurance Structure Actual Both
16 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (1 of 2) Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
The Allstate Corporation NYSE:ALL ✓ Net PML Pre-Tax Target Aggregate
Assicurazioni Generali SpA MIL:G ✓ Other
Aviva Plc LSE:AV. ✓ Net PML Pre-Tax Target Both
AXA SA ENXTPA:CS Reinsurance Structure Actual Occurrence
Donegal Group Inc. NASDAQ:DGICA Reinsurance Structure Actual Occurrence
Echelon Financial Holdings Inc. TSX:EFH Reinsurance Structure Actual Occurrence
Erie Indemnity Company NASDAQ:ERIE Reinsurance Structure Actual Aggregate
Federated National Holding Company NASDAQ:FNHC ✓ 50 yr Net PML Pre-Tax Actual Occurrence
Hanover Insurance Group, Inc. NYSE:THG Reinsurance Structure Actual Both
HCI Group Inc. NYSE:HCI ✓ 50yr,127 yr, 260yr, 320yr Net PML Pre-Tax Actual Occurrence
Heritage Insurance Holdings, Inc. NYSE:HRTG ✓ Reinsurance Structure Actual Both
Hilltop Holdings Inc. NYSE:HTH None
Horace Mann Educators Corporation NYSE:HMN Reinsurance Structure Actual Occurrence
Insurance Australia Group Limited ASX:IAG ✓ ✓ 1000yr Net PML Pre-Tax Target Aggregate
17 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (2 of 2) Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
Intact Financial Corporation TSX:IFC 500yr Reinsurance Structure Actual Aggregate
Kemper Corporation NYSE:KMPR Reinsurance Structure Actual Both
Kingstone Insurance Company NASDAQ:KINS ✓ Net PML Pre-Tax Target Occurrence
MAPFRE SA MAD:MAP None
Mercury General Corporation NYSE:MCY Reinsurance Structure Actual Occurrence
National General Holdings Corporation NASDAQ:NGHC Reinsurance Structure Actual
NI Holdings, Inc NASDAQ:NODK Reinsurance Structure Actual Occurrence
Progressive Corporation NYSE:PGR Reinsurance Structure Actual Aggregate
Royal & Sun Alliance Insurance Plc LSE: RSA ✓ Reinsurance Structure Actual Occurrence
Safety Insurance Group, Inc. NASDAQ:SAFT ✓ 135 yr Net PML Post-Tax Actual Occurrence
State Auto Financial Corporation NASDAQ:STFC Reinsurance Structure Actual Occurrence
United Insurance Holdings Corp. NASDAQ:UIHC Reinsurance Structure Actual Aggregate
Universal Insurance Holdings, Inc. NYSE:UVE ✓ Reinsurance Structure Actual Occurrence
Vienna Insurance Group AG WBAG:VIG Reinsurance Structure Actual Occurrence
18 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Specialty Lines Sector (1 of 2) Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
American Financial Group, Inc. NYSE:AFG ✓ ✓ 500yr Net PML Pre-Tax Actual Occurrence
Amerisafe, Inc. NASDAQ:AMSF Reinsurance Structure Actual
ARCH Capital Group, Ltd. NASDAQ:ACGL ✓ Net PML Pre-Tax Target Occurrence
Argo Group International Holdings, Ltd. NYSE:ARGO None
Assurant, Inc. NYSE:AIZ Reinsurance Structure Actual Occurrence
Beazley Plc LSE:BEZ ✓ Net PML Pre-Tax Actual Occurrence
CV Starr - None
Employers Holdings, Inc. NYSE:EIG Reinsurance Structure Actual Occurrence
First Acceptance Corporation OTCQX:FACO None
Global Indemnity Plc NASDAQ:GBLI Reinsurance Structure Actual Occurrence
Hallmark Financial Services, Inc. NASDAQ:HALL Reinsurance Structure Actual Aggregate
Hiscox Limited LSE:HSX ✓ ✓ ✓ Net PML Pre-Tax Target Occurrence
James River Group Holdings, Ltd. NASDAQ:JRVR 1000yr Net PML Pre-Tax Target
19 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Specialty Lines Sector (2 of 2) Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
Kingsway Financial Services Inc. NYSE:KFS None
Lancashire Holdings Limited LSE:LRE ✓ ✓ Net PML Pre-Tax Actual Occurrence
Markel Corporation NYSE:MKL None
Palomar Holdings, Inc. NASDAQ:PLMR ✓ Net PML Pre-Tax Actual Occurrence
ProSight Global, Inc. NYSE:PROS Reinsurance Structure Actual Occurrence
RLI Corp. NYSE:RLI ✓ Net PML Pre-Tax Actual Occurrence
Sampo Plc - Reinsurance Structure Actual Occurrence
State National Companies Inc. - None
Suncorp Group Limited ASX:SUN Reinsurance Structure Actual Aggregate
Topdanmark A/S CPSE:TOP Reinsurance Structure Actual Occurrence
Unico American Corporation NASDAQ:UNAM Reinsurance Structure Actual Aggregate
United Fire Group, Inc. NASDAQ:UFCS Reinsurance Structure Actual Occurrence
W. R. Berkley Corporation NYSE:WRB Reinsurance Structure Actual Occurrence
White Mountains Insurance Group, Ltd. NYSE:WTM None
20 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Reinsurance Sector Metric Disclosures
Aggregate/
Company Ticker 100yr 200yr 250yr Other RPs (List) Risk Quantification Metric Pre- or Post-Tax Actual/ Target Occurrence
Alleghany Corporation NYSE:Y ✓ ✓ Net PML Post-Tax Actual Occurrence
AXIS Capital Holdings Limited NYSE:AXS ✓ ✓ 50yr Net PML Pre-Tax Actual Both
Berkshire Hathaway Inc. NYSE:BRK.B Other Pre-Tax Target Aggregate
China Reinsurance (Group) Corporation SEHK:1508 Other
Everest Re Group, Ltd. NYSE:RE ✓ ✓ 20yr, 50yr, 500yr, 1000yr Net PML Pre-Tax Target Occurrence
Greenlight Capital Re, Ltd. NASDAQ:GLRE ✓ Net PML Pre-Tax Actual Aggregate
Hannover Rück SE XETRA:HNR1 ✓ ✓ ✓ Net PML Pre-Tax Target Aggregate
Maiden Holdings, Ltd. NASDAQ:MHLD None
Münchener Rückversicherungs -Gesellschaft AG XETRA:MUV2 ✓ Net PML Pre-Tax Actual Occurrence
Partner Re - ✓ 500yr Net PML Pre-Tax Actual Occurrence
RenaissanceRe Holdings Ltd. NYSE:RNR None
SCOR SE ENXTPA:SCR ✓ Net PML Pre-Tax Actual Occurrence
SiriusPoint Ltd.. NYSE:SPNT None
Swiss Re Limited SWX:SREN ✓ Net PML Pre-Tax Actual Occurrence
Watford Holdings Ltd. NASDAQ:WTRE ✓ Net PML Pre-Tax Actual Occurrence
21 Proprietary & ConfidentialSection 4:
Risk Tolerance Summary
22 Proprietary & Confidential
Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector (1 of 5)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Allianz Group XETRA :ALV N/A - - - The top three perils contributing to the natural catastrophe risk as of 31 December 2020 Allianz Group 2020 12/31/2020
were: windstorms in Europe, floods in Germany, and earthquakes in Australia. Annual Report, Risk
Management
Section, Page100
American International Group, NYSE :AIG Actual 1.9% - 7.3% For 100-year return period scenario, Occurrence Exceedance Probability (OEP) losses are American 12/31/2020
Inc. $1.31B (net of 2020 reinsurance, pretax) for US Hurricane and $0.563B for Japanese Wind. International Group
For 250-year return period scenario, Occurrence Exceedance Probability (OEP) losses are 2020 10-K Filing,
$4.901B (net of 2020 reinsurance, pretax) for World-wide all peril, $1.240B (net of 2020 Natural Catastrophe
reinsurance, pretax) for US Earthquake and $0.608B for Japanese Earthquake. Total Risk section, Page
Shareholders equity as of 12/31/2020 is $67.199bn. 178
Chubb Limited NYSE :CB Actual 6.7% - 11.1% Their modeled annual aggregate pre-tax probable maximum loss (PML), net of reinsurance, Chubb limited 2020 12/31/2020
for 100-year return period for U.S. hurricane and California earthquake at December 31, 10-K Filing,
2020, is 4.6% and 2.2% of the total shareholders' equity, respectively and for 250-year Catastrophe
return period for U.S. hurricane and California earthquake, PML is 8.3% and 2.5% of the Management
total shareholders' equity, respectively. Section, Page 119
Cincinnati Financial NASDAQ Actual 1.5% - 3.7% We use the Risk Management Solutions (RMS) and Applied Insurance Research (AIR) Cincinnati Financial 12/31/2020
Corporation :CINF models to evaluate exposures to a once-in-a-100-year and a once-in-a-250- year event to Corp 2020 10-K
help determine appropriate reinsurance coverage programs. In conjunction with these Filing, Reinsurance
activities, we also continue to evaluate information provided by our reinsurance broker. (Net Programs section,
PML for 1:50 Year, 1:100 Year, 1:250 Year and 1:500 based upon RMS is 1.3%,1.5%, Page 110
3.7% and 6.8% of total equity and based upon AIR is 1.3%, 1.5%, 2.6% and 5.1% of total
equity). Shareholders Equity as of 12/31/2020: $9.86 bn). Net losses are net of reinsurance
and income tax.
Information in red is disclosed on a post-tax basis
23 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector (2 of 5)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
CNA Financial Corporation NYSE Actual - - - We purchased corporate catastrophe excess-of-loss treaty reinsurance covering our U.S. states and CNA Financial 12/31/2020
:CNA territories and Canadian property exposures underwritten in our North American and European Corporation , 2020 10
companies. Exposures underwritten through Hardy are excluded. The treaty has a term of May 1, K Filing, Catastrophe
2020 to May 1, 2021 and provides coverage for the accumulation of covered losses from catastrophe and Reinsurance
occurrences above our per occurrence retention of $250 million up to $1.2 billion. Losses stemming Section, Page 23
from terrorism events are covered unless they are due to a nuclear, biological or chemical attack. All
layers of the treaty provide for one full reinstatement.(Shareholders Equity as of 12/31/2020 is
$12.707bn)
Direct Line Insurance Group Plc LSE Actual - 4.3% - Catastrophe reinsurance to protect against an accumulation of claims arising from a natural perils Direct Line Insurance 12/31/2020
:DLG event. The retained deductible is £130 million, and cover is placed annually on 1 July up to a Group Plc 2020
modelled 1-in-200-year loss event of £1,125 million.(Shareholders Equity as of 12/31/2020 is £3046.2 Annual report ,
million) Reinsurance section,
Page 32
Fairfax Financial Holdings TSX Target - - 15.0% The company’s objective is to limit its company -wide catastrophe loss exposure such that one year’s Fairfax Financial 2020 12/31/2020
Limited :FFH aggregate pre-tax net catastrophe losses would not exceed one year’s normalized net earnings Annual Report,
before income taxes. The company takes a long term view and generally considers a 15% return on Catastrophe Risk
common shareholders’ equity, adjusted to a pre-tax basis, to be representative of one year’s section, Page 113
normalized net earnings. The modeled probability of aggregate catastrophe losses in any one year
exceeding this amount is generally more than once in every 250 years.
Liberty Mutual Holding Company - Actual - - - The Company has property catastrophe reinsurance coverage for its domestic business and certain Liberty Mutual Holding 12/31/2020
Inc. specialty operations including: 1) hurricanes and earthquake reinsurance covering a substantial Company Inc. FIN
portion of $3,300 of loss in excess of $300 of retained loss in the United States, Canada and the SUPP_2020-12-31 -
Caribbean, excluding certain reinsurance exposures; 2) aggregate excess of loss programs; and 3) Page: 30
quota share reinsurance programs. These programs are structured to meet the Company’s
established tolerances under its Enterprise Risk Management Program.
24 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector (3 of 5)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
MS&AD Insurance Group TSE Actual - - - As of 3/31/2021, MS has catastrophe reserves of JPY 580.4 B (USD 5.32 B ) and AD has catastrophe MS&AD 2020 3/31/2021
Holdings, Inc. :8725 reserves of JPY 331B (USD 3.03 B). MS has catastrophe risk of JPY 100.6 B (USD 0.92 B) and AD Supplement Report,
has catastrophe risk of JPY 71 B (USD 651.7 M) . page 26
As of 03/31/2021, MS&AD's risk amounted to JPY2.3Tn (USD 21.10 B ) calculated as 99.5% VaR. MS&AD: FY2020
[Stockholders Equity as of 03/31/2021 is JPY 3,126.65 bn (USD 28.27 B)] Second Information
Meeting, page 12
Old Republic International Co NYSE N/A - - - No risk tolerance metrics indicated N/A N/A
:ORI
QBE Insurance Group Limited ASX: Actual - - - QBE uses reinsurance mainly for reducing volatility of capital and performance metrics. With some QBE Insurance Group 11/3/2021
QBE exceptions, QBE’s outwards reinsurance purchasing is centralized within Equator Re, the group’s 2020 AMB Report,
reinsurance captive. In line with the group's strategy to de-risk the portfolio, the group's 2019 Reinsurance Section,
structure provided higher protection from catastrophe and large losses, with material reduction in Page 10
probable maximum losses. In particular, the group reduced its retention and increased the
catastrophe protection limit. The group also maintains an aggregate cover for protection from high
occurrence of medium-sized events. Further revisions were made with the 2020 reinsurance
placement, and, At the 2021 renewal, the group increased its main catastrophe tower limit to USD 3.4
billion (2020: USD 3.3 billion), while refining areas including retention for certain non -peak peril
exposures. With the placement of the 2021 structure, QBE also announced an increased net
catastrophe allowance of USD 685 million (2020: USD 550 million), to reflect recent heightened
catastrophe experience.
Selective Insurance Group, Inc. NASDAQ:SIGI Actual 1.0% 2.0% 5.0% Our current catastrophe reinsurance program exhausts at an approximately 1 in 220 -year return Selective Insurance 12/31/2020
period, or events with 0.5% probability, based on a multi -model view of hurricane risk. 1.0% of equity Group 2020 10-K
after tax for 1:100-year event (OEP: 1%); 2% of equity after tax for 1:200-year event (OEP: 0.5%); 5% Filing, page 112
of equity after-tax for 1:250-year event (OEP: 0.4%) Shareholders Equity as of 12/31/2020: $2.74 bn
25 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector (4 of 5)
Disclosed Risk Tolerance
Actual/ Target 1:100 1:200 1:250 Summary Source Date
Company Ticker
Sompo Japan Nipponkoa TSE:863 Actual - - - As of 3/31/2021, SOMPO Holdings has catastrophe reserves of JPY 497.5 B (USD 4.57 B ) and Summary of Consolidated 3/31/2021
Holdings, Inc. 0 major catastrophe risk of JPY 172.37B (USD 1.57B) Financial Results for the
As of 3/31/2021, SOMPO Holdings' risk amounted to JPY 1.3 Tn (USD11.93B ) calculated as fiscal year ended March 31,
99.5% VaR. [Stockholders Equity as of 03/31/2021 is JPY 2,031.16 bn (USD18.36 B )] 2021, page 13, Highlights of
FY2020 Results _ Sompo
Holdings, Inc. - page 49
Talanx AG XETRA Actual - 15.3% - The estimates for the 200-year net loss burdens for the Group are as follows: Atlantic HU - EUR Talanx Group 2020 Annual 12/31/2020
:TLX 2,6026; US EQ - EUR 2,261M; EU WS - EUR 1,187M; Asia Pacific EQ (Japan also included) - Report, Reserving Risk -
EUR 1,596M; Central and South-American EQ - EUR 1,525; EU EQ- EUR 1,112M; EU flood- EUR Concentration risk Section,
988.(Total Shareholders Equity as of 12/31/2020 is EUR 17,125M). Page 112
The Hartford Financial Services NYSE Target - - 15.0% The estimated pre-tax loss for a 1 in 250 single event net of reinsurance is less than 15% of Hartford 2020 10-K Filing, 12/31/2020
Group, Inc. :HIG statutory surplus of the P&C operations. The estimated 250-year pre-tax probable maximum loss Natural catastrophe risk
from earthquake events is estimated to be $1.2 Billion before reinsurance and $0.6 billion net of section , Page 169
reinsurance. The estimated 250-year pre-tax probable maximum losses from hurricane events are
estimated to be $1.8 billion before reinsurance and $0.9 billion net of reinsurance. (Stockholders
Equity as of 12/31/2020 is $18,556 mn)
Tokio Marine Holdings, Inc. TSE:876 Actual - - - As of 12/31/2020, Tokio Marine Holdings, Inc. has catastrophe reserve of JPY 1023.3 Bn (USD Tokio Marine Solvency 12/31/2020
6 9.39 B ) and catastrophe risk of JPY 271.9 Bn (USD 2.49 B) margin ratio on a
The model based on 99.95% VaR is continued to be used for risk calculation. [Stockholders Equity consolidated basis as of
as of 12/31/2020 is JPY 3601.3 bn (USD 34.89 B)] December 31, 2020 , page 1
Tokio Marine Group FY2020
Results and FY2021 Profits,
page 32
26 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Commercial Lines Sector (5 of 5)
Disclosed Risk Tolerance
Actual/ Target 1:100 1:200 1:250 Summary Source Date
Company Ticker
Travelers Companies, Inc. NYSE: Actual 5.8% - 7.9% Net, after-tax single U.S. hurricane 1:100 is 5.8% and 1:250 is 7.9% while Net, after tax Travelers 2020 10-K 12/31/2020
TRV single U.S. and Canadian EQ 1:100 is 2.7% and 1:250 is 4.1% (Total Shareholders Filing, Catastrophe
Equity as at 12/31/2020 : $29.2 bn) Modeling Section, Page
90
Zurich Insurance Group Ltd. SWX: Actual - - - N/A Zurich Financial Services 12/31/2020
ZURN 2020 Annual Report, Risk
Review Section, Page 145
27 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (1 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
The Allstate Corporation NYSE Target 6.6% - - Our current catastrophe reinsurance program supports our risk tolerance framework that Allstate Corp 2020 12/31/2020
:ALL targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes and 10-K Filing, Allstate
earthquakes, net of reinsurance, exceeding $2 billion. The use of different assumptions and Protection pricing
updates to industry models and to our risk transfer program could materially change the and risk
projected loss. Growth strategies include areas where we believe diversification can be management
enhanced and an appropriate return can be earned for the risk. As a result, our modeled strategies, Page 8
exposure may increase, but in aggregate remain lower than $2 billion as noted above. In
addition, we have exposure to other severe weather events and wildfires, which impact
catastrophe losses. Shareholders Equity as of 12/31/2020 $30.217bn
Assicurazioni Generali SpA MIL:G N/A - - - Generali has centralized the program in recent years and is consistent with the group's risk Assicurazioni 12/31/2020
appetite and limits. It's primarily designed to provide protection against natural catastrophe Generali S.P.A. AM
exposures through excess of loss treaties. The group's largest exposures are to earthquakes in Best Report A.M.
Italy, followed by European windstorms. Given the program's design and Generali's mix of Best # 085124, Page
business, retention is high, with the group traditionally retaining around 95% of GWP. the group 8, Assicurazioni
using both internal and third-party models to assess its exposure. protection in each territory Generali
designed in line with the geographical footprint; however minimum coverage requirement set at S.p.A._Other
250-y return period OEP Financials_2020-12-
31_English Page 56
Aviva Plc LSE:AV. Target - - 0.9% The Group purchases a Group-wide catastrophe reinsurance programme to protect against Aviva PLC 2020 12/31/2020
catastrophe losses up to a 1 in 250 - year return period. The total Group potential retained loss Annual Report, Risk
from its most concentrated catastrophe exposure peril (Northern Europe Windstorm) is Management
approximately £150 million on a per occurrence basis and £175 million on an annual aggregate Section, Page 241
basis. Any losses above these levels are covered by the group -wide catastrophe reinsurance
programme to a level in excess of a 1 in 250- year return period. (Shareholders Equity as of
12/31/2020 is £20,560 million)
28 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (2 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
AXA SA ENXTPA:CS Actual - - - 2021 Simplified Group Nat Cat Reinsurance Program ; Retention lowered to €500m for NA AXA SA IP Full Year 12/31/2020
key perils vs 2020 program 2020 Earnings,
Page 26
Donegal Group Inc. NASDAQ:DGI Actual - - - catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries Donegal Insurance 12/31/2020
CA recovered, through a series of reinsurance agreements, 100% of an accumulation of many Group 2020 10-K
losses resulting from a single event, including natural disasters, over a set retention of Filing, Reinsurance -
$15.0 million up to aggregate losses of $185.0 million per occurrence. Unaffiliated
Reinsurer Section,
Page 27
Echelon Financial Holdings TSX:EFH Actual - - - During 2020, the Company followed the policy of underwriting and reinsuring contracts of 2020 Consolidated 12/31/2020
Inc. insurance, which limits the net exposure of the Company to a maximum amount on any one Financial
loss to $1,000 (2019 – $1,000) for auto and liability and $500 (2019- $500) for property. In Statements, Echelon
addition, the Company obtained catastrophe reinsurance which limits the loss from a series Financial Holgings,
of claims arising from a single occurrence to $1,000 (2019 – $1,000), to a maximum Underwriting Policy
coverage of $35,000 (2019 – $30,000) & Reinsurance
Ceded section,
Page 25
29 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (3 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Erie Indemnity Company NASDAQ:ERIE Actual - - - For casualty risks, the maximum net retention per risk is $12.0 million, which includes underlying A.M. Best Credit 7/10/2020
and umbrella policies. Facultative reinsurance is purchased for any umbrella policy with limits in Report (4283) Page 9
excess of $12.0 million. For property risks, the maximum net retention per risk is $25.0 million.
Facultative reinsurance is purchased for any property exposure greater than $25.0 million per risk.
Effective January 1, 2020, property catastrophe reinsurance provides total coverage in four layers
of $540 million excess of $400 million retention. The first layer provides coverage of 35% of $100
million excess of $400 million retention; the second layer provides coverage of 100% of $300
million excess of $500 million; the third layer provides coverage of 60% of $300 million excess of
$800 million and the fourth layer provides coverage of 100% of $25 million excess $1.1 billion.
Federated National Holding NASDAQ:FNH Actual 15.0% - - The Company's catastrophe reinsurance program shall have a U.S. dollar maximum retention per Federated National 12/31/2020
Company C Catastrophe Event, in connection with the 1:100 and 1:50 levels no greater than 15% of the Holdings Company
Company's Consolidated Capital (Stockholders Equity as of 12/31/2020 is $158.160 mn) 2020 10-K Filing,
Reinsurance
Programs Section,
Page 77, FedNat
Holding Company -
8K - FNHC - page 50
Hanover Insurance Group, Inc. NYSE: Actual - - - The property catastrophe occurrence program provides coverage, on an occurrence basis, up to Hanover Insurance 12/31/2020
THG $1.1 billion countrywide, less a $200 million retention, with no co -participation, for all defined perils. Group 2020 10-K
For occurrences from $1.1 billion to $1.3 billion, we have coverage for 33% of losses. Additionally, Filing, page 12
there is a program feature which provides coverage in excess of $300 million in aggregate
catastrophe losses. This feature provides $75 million of coverage, subject to 24% coparticipation,
that may respond either to an event that exceeds $1.1 billion or to events in excess of $300 million
in aggregate catastrophe losses. The catastrophe losses subject to the aggregate feature are
limited only to those events that exceed $7.5 million of incurred losses per event and have a per
occurrence limit of $200 million.
30 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (4 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
HCI Group Inc. NYSE: Actual 8.0% - - 2020-2021 Reinsurance Program provides 1st event cover for RMS v18 Long-Term HCI Group Inc. 3/5/2021
HCI Hurricane, with Loss Amplification, excluding Storm Surge, without Secondary Uncertainty Investor
with $16M Retention, exhaustion of $1400M and limit of $1384M ($1400-$16M). They also Presentation March
have limits for different events of 1 in 320-year event ($1400M), 1 in 260-year event 2021, 2020-2021
($1240M), 1 in 100-year event ($709M). They provide 2nd event cover for Florida Hurricane Reinsurance
Catastrophe Fund (FHCF) they also have limits for different events of , 1 in 50-year event Program Section,
($418M), , 1 in 127-year event ($280M). (Stockholders Equity as of 12/31/2020 is $201.136 Page 14
mn)
Heritage Insurance Holdings, NYSE: Actual - - - The reinsurance program, which is segmented into layers of coverage, protects the Heritage Insurance 12/31/2020
Inc. HRTG Company for excess property catastrophe losses and loss adjustment expenses. The 2020- Holdings Inc. 2020
2021 reinsurance program provides first event coverage up to $1.35 billion for Heritage 10-K Filing,
P&C, first event coverage up to $965.0 million for NBIC, and first event coverage up to Products and
$690.0 million for Zephyr. Our first event retention in a 1 in 100-year event would include distribution Section,
retention for the respective insurance company as well as any retention by Osprey. The first Page 106
event maximum retention up to a 1 in 100-year event for each insurance company
subsidiary is as follows: Heritage P&C – $20.0 million; Zephyr – $20.0 million; NBIC – $13.3
million. In a 1-to-100-year event and including Osprey’s retention, the range of loss
depending upon the geographic region affected would be between an additional $22.1
million to $41.8 million above the amounts noted for the insurance company retentions. The
Company's estimated net cost for the 2020-2021 catastrophe reinsurance programs is
approximately $272.1 million.
Hilltop Holdings Inc. NYSE: N/A - - - No risk tolerance metrics indicated N/A N/A
HTH
31 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (5 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Horace Mann Educators NYSE: Actual - - - The Company maintains catastrophe excess of loss reinsurance coverage. For 2020, the Horace Mann 2020 12/31/2020
Corporation HMN Company's catastrophe excess of loss coverage consisted of one contract in addition to a 10-K Filing, Property
minimal amount of coverage by the Florida Hurricane Catastrophe Fund (FHCF). The & Casualty
catastrophe excess of loss contract provided 95% coverage for catastrophe losses above a Reinsurance
retention of $25.0 million per occurrence up to $175.0 million per occurrence. This contract Section, page 11,
consisted of three layers, each of which provided for one mandatory reinstatement. The 135
layers were $25.0 million excess of $25.0 million, $40.0 million excess of $50.0 million and
$85.0 million excess of $90.0 million. Our 2021 catastrophe excess of loss reinsurance
coverage is unchanged from 2020.
Insurance Australia Group ASX: Target - - 7.7% The ReMS outlines IAG's reinsurance principles, including the requirement that Insurance Australia 6/30/2020
Limited IAG reinsurance retention for catastrophe must not exceed 4% of gross earned premium. IAG Group 2020 Annual
purchases catastrophe reinsurance protection to at least the greater of a 1-in-250 - year Report, Reinsurance
return period for earthquake loss calculated on a whole-of-portfolio basis for Australia; and risk section, Page
a 1-in-1000 - year return period for earthquake loss calculated on a whole-of-portfolio basis 76
for New Zealand. This is a more conservative view than APRA’s prescribed minimum
approach of 1-in-200-year return period loss calculated on a whole-of-portfolio, all perils
basis. a Group catastrophe reinsurance protection that runs to a calendar year and
operates on an excess of loss basis, with IAG retaining the first $250 million ($169 million
post-quota share) of each loss. It covers all territories in which IAG operates. The limit of
catastrophe cover purchased effective 1 January 2020 was $9.75 billion placed to 67.5%
(i.e., net of the whole-of account quota share). Should a loss event occur that is greater
than $10 billion, (Shareholders Equity as of 6/30/2020 is AUD 6,354million)
32 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (6 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Intact Financial Corporation TSX: Actual - - - For multi-risk events and catastrophes, the Company retains participations averaging 10.2% as at Intact Financial corp 12/31/2020
IFC December 31, 2020 (5.5% as at December 31, 2019) on reinsurance layers between the retention 2020 Annual Report,
and coverage limit. The coverage limit prudently exceeds the Company's risk assessment of an Reinsurance section,
earthquake in Western Canada at a 1-in-500-year return period. Effective January 1, 2021, the Page 167,66
Company maintained its coverage limits but increased the retention to $150 million and retains
participations averaging 9.2% on
reinsurance layers between the retention and coverage limit. The coverage limits are well in
excess of the regulatory requirements with respect to the earthquake risk. As at December 31,
2020, we retain participations averaging 10.2% on reinsurance layers between the retention and
coverage limit. Effective January 1, 2021, we maintained our coverage limit of $5.3 billion for multi-
risk events and catastrophes but increased the retention from $100 million to $150 million. For
2021, we retain participations averaging 9.2% on reinsurance layers between the retention and
coverage limit.
Kemper Corporation NYSE:KMPR Actual - - - Coverage for the property and casualty group's catastrophe reinsurance program is provided by Kemper P&C Group 1/28/2021
three multi-year excess of loss reinsurance contracts, one annual excess of loss reinsurance AM Best Report #914,
contract, and an annual aggregate excess property catastrophe reinsurance contract. In total, the Reinsurance Section -
excess of loss insurance contracts cover 95% of $225.0M in excess of $50.0M in various layers. Page 8, 2020 10-K
The aggregate property catastrophe reinsurance contract provides coverage for accumulated Filing - Page 15
property catastrophe losses of $50.0M in excess of $60.0M on losses arising out of one or more of
the following perils from storms or storm systems that are not named storms: (1) windstorm, (2)
hail, (3) tornado, and (4) fire, including ensuing collapse and water damage. The first multi -year
excess of loss reinsurance contract provides coverage over the three-year period of January 1,
2019 through December 31, 2021 (the “2019 Reinsurance Contract”). The 2019 Reinsurance
Contract provides coverage in two layers, which together provide coverage for losses on individual
catastrophes of $200 million in excess of $50 million. Under the 2019 Reinsurance Contract, the
percentage of coverage is 31.66% for each year in the three-year period, and participation of each
reinsurer remains the same over the entire three-year period. Accordingly, the 2019 Reinsurance
Contract provides coverage for 31.66% of losses on individual catastrophes of $200 million in
excess of $50 million in 2021.
33 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (7 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Kingstone Insurance Company NASDAQ:KINS Target 6.1% - - In 2020, we purchased catastrophe reinsurance to provide coverage of up to $485,000,000 for losses Kingstone Insurances 12/31/2020
associated with a single event. One of the most commonly used catastrophe forecasting models 2020 10-K filing,
prepared for us indicates that the catastrophe reinsurance treaties provide coverage in excess of our Reinsurance Section,
estimated probable maximum loss associated with a single more than one -in-130- year storm event. Page 13,19,4,5
The direct retention for any single catastrophe event is $10,000,000. For the period December 15,
2019, through December 30, 2020, losses on personal lines policies were subject to the 25% quota
share treaty, which resulted in a net retention by us of $5,625,000 of exposure per catastrophe
occurrence. Effective July 1, 2020, we have reinstatement premium protection on the first
$70,000,000 layer of catastrophe coverage in excess of $10.000,000. This protects us from having to
pay an additional premium to reinstate catastrophe coverage for an event up to this level. Effective
July 1, 2020, KICO decreased the top limit of its catastrophe reinsurance coverage from
$610,000,000 to $485,000,000, which, at the time, equated to more than a 1 -in-130- year storm event
according to the primary industry catastrophe model that we follow. (Stockholders Equity as of
12/31/2020 is $92.8mn)
MAPFRE SA MAD: N/A - - - No risk tolerance metrics indicated N/A N/A
MAP
Mercury General Corporation NYSE: Actual - - - The Company is party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils Mercury 2020 10-K 12/31/2020
MCY that is effective through June 30, 2021. For the 12 months ending June 30, 2021, the Treaty provides Filing, Reinsurance
$717 million of coverage on a per occurrence basis after covered catastrophe losses exceed the $40 Section Page 18
million Company retention limit. The Treaty specifically excludes coverage for any Florida business
and for California earthquake losses on fixed property policies, such as homeowners, but does cover
losses from fires following an earthquake. In addition, the Treaty excludes losses from wildfires on
89.5% of certain coverage layers of the Treaty. For the 12 months ended June 30, 2020, the Treaty
provided $600 million of coverage on a per occurrence basis after covered catastrophe losses
exceeded the $40 million Company retention limit. The Treaty specifically excluded coverage for any
Florida business and for California earthquake losses on fixed property policies such as homeowners
but did cover losses from fires following an earthquake.
34 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (8 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
National General Holdings NASDAQ Actual - - - Effective May 1, 2020, with additional purchases made at June 1, 2020, and July 1, 2020, the National General 12/31/2020
Corporation :NGHC Company renewed its property catastrophe excess of loss program, protecting the Company against Holdings Corp 10K,
catastrophic events and other large losses. The program provides coverage up to $650,000 with one Page 205 Catastrophe
reinstatement and attaches at $70,000 for the first event and $50,000 for the second event. The Reinsurance
Company purchased additional first event coverage for named wind that attaches at $50,000. Effective
October 1, 2020, the Company’s casualty program provides $35,000 in coverage in excess of a $5,000
retention. Effective July 1, 2020, the Reciprocal Exchanges’ property catastrophe excess of loss
program provided coverage up to $475,000 with a $20,000 retention, and one reinstatement. Effective
July 17, 2020, the Company purchased an additional $125,000 of top layer coverage.
NI Holdings, Inc NASDAQ Actual - - - As a group, during the year ended December 31, 2020, the Company retained the first $10,000 of NI Holdings, Inc 10K, 12/31/2020
:NODK weather-related losses from catastrophic events and had reinsurance under various reinsurance Reinsurance Section -
agreements up to $97,000 in excess of its $10,000 retained risk. As a group, during the year ended Page 123
December 31, 2019, the Company retained the first $10,000 of weather-related losses from
catastrophic events and had reinsurance under various reinsurance agreements up to $74,600 in
excess of its $10,000 retained risk. For 2021, the catastrophe retention amount remains at $10,000
while the overall catastrophic reinsurance program limit increased to $117,000 in excess of the $10,000
retention.
Progressive Corporation NYSE Actual - - - On January 1, 2021, we entered into a new aggregate excess of loss program with three layers. The Progressive 12/31/2020
:PGR first layer has a retention threshold of $475 million and provides $75 million of coverage for catastrophe Corporation, 2020 10
losses and ALAE, except those from named storms (both hurricanes and tropical storms). The second K, Commitments and
layer has a retention threshold of $550 million and provides $50 million of coverage on losses and Contingencies section,
ALAE from both named and non-named storms. The third layer has a retention threshold of $600 page 9, 10
million and provides $100 million of coverage, which includes $95 million under the catastrophe bond,
on losses and ALAE from both named and non-named storms to the extent losses are in excess of the
coverages provided under the first two layers. Each layer is subject to a per occurrence $2 million
deductible before each loss could be considered for aggregate retention, and each event is subject to a
$98 million coverage cap. we have several multiple-layer property catastrophe reinsurance contracts
with various reinsurers with terms ranging from one to three years; the minimum commitment under
these agreements at December 31, 2020, was $191.1 million.
35 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (9 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
Royal & Sun Alliance Insurance Plc LSE: Actual - - - Our catastrophe reinsurance covers flood, windstorms, hurricanes, wildfires and other severe weather RSA Group 2020,Key 12/31/2020
RSA events, with special provisions providing additional protection for prolonged or greater frequency events. risks and mitigants
Our reinsurance program is designed to cover at least 1-in-200-yea r events and is optimized to mitigate the section, page 37,
impact of extreme weather. Our main Catastrophe retentions remain at £75m for the UK and Europe Earnings Release, Page
combined, £50m for Europe excluding the UK and $75m for Canada. 28
Safety Insurance Group, Inc. NASDAQ:SAFT Actual 20.0% - - For 2021, we have purchased the same four layers of excess catastrophe reinsurance providing $615,000 Safety Insurance Group 12/31/2020
of coverage for property losses in excess of $50,000 up to a maximum of $665,000. Our reinsurers’ co- 2020 10-K Filing,
participation is 50.0% of $50,000 for the 1st layer, 80.0% of $50,000 for the 2nd layer, 80.0% of $250,000 Reinsurance Section,
for the 3rd layer and 80% of $265,000 for the 4th layer. As a result of the changes to the models, our Page 29
catastrophe reinsurance in 2021 protects us in the event of a “135-year storm.” The FAIR Plan’s exposure to
catastrophe losses increased and as a result, the FAIR Plan decided to buy reinsurance to reduce their
exposure to catastrophe losses. On July 1, 2020, the FAIR Plan purchased $1,800,000 of catastrophe
reinsurance for property losses with retention of $100,000. A comprehensive catastrophe reinsurance
program reduces the net after-tax probable maximum loss (PML) expected to arise from a 100-year
hurricane event to approximately 20% of reported policyholders' surplus at year-end 2020.
State Auto Financial Corporation NASDAQ:STFC Actual - - - Property Catastrophe Treaty Members of the State Auto Group maintain a property catastrophe excess of State Auto Financial 12/31/2020
loss reinsurance agreement, covering property catastrophe related events affecting at least two risks. This Corp. 2020 10-K Filing,
property catastrophe reinsurance agreement renewed as of July 1, 2020. Under this reinsurance Reinsurance
agreement, we retain the first $90.0 million of catastrophe loss, each occurrence, with a 5.0% co- Arrangements Section,
participation on the next $180.0 million of covered loss, each occurrence which is broken down into two page 87
layers of $70.0 million and $110.0 million. The reinsurers are responsible for 95.0% of the catastrophe
losses excess of $90.0 million up to $270.0 million, each occurrence. The State Auto Group is responsible
for catastrophe losses above $270.0 million. There is also an automatic reinstatement of the limit, for 100%
of the deposit premium. Property Per Risk Treaty As of April 1, 2020, the State Auto Group renewed the
property per risk excess of loss reinsurance agreement for a 15-month term. Under this reinsurance
agreement, the State Auto Group retains the first $4.0 million of covered loss, with a 19.5% co-participation
on the next $6.0 million of covered loss and a 14.0% co-participation on covered loss between $10.0 million
and $20.0 million. The reinsurers are responsible for 80.5% of the loss excess of the $4.0 million retention
up to $10.0 million and 86.0% of the loss excess of $10 million up to $20.0 million.
36 Proprietary & ConfidentialCatastrophe Risk Tolerance - Public Disclosure
P&C Personal Lines Sector (10 of 10)
Disclosed Risk Tolerance
Actual/ 1:100 1:200 1:250 Summary Source Date
Company Ticker Target
United Insurance Holdings Corp. NASDAQ:UIHC Actual - - - Our program includes excess of loss, aggregate excess of loss and quota share treaties. Our excess of loss United Insurance 12/31/2020
treaty, in effect from June 1, 2020 through May 31, 2021, provides coverage for catastrophe losses from named Holdings Corp 2020 10-
or numbered windstorms and earthquakes up to an exhaustion point of approximately $3,300,000,000. In K Filing, Reinsurance
addition to this treaty, we had an aggregate excess of loss treaty, effective January 1, 2020, which provided section, Page 134
coverage for all catastrophe perils other than hurricanes, tropical storms, tropical depressions and earthquakes.
We ceded $30,000,000 of catastrophe losses under this treaty for the year ended December 31, 2020. In
addition, we had an all other perils excess of loss treaty, effective January 1, 2020, which provided coverage for
all catastrophe perils other than hurricanes, tropical storms, tropical depressions, and earthquakes up to an
exhaustion point of approximately $110,000,000. The quota share agreements effective June 1, 2020 through
May 31, 2021, provide coverage for all catastrophe perils and attritional losses incurred by our insurance
subsidiaries UPC and FSIC, and were extended to cover ACIC effective December 31, 2020 through May 31,
2022 with an additional 8% coverage for UPC and FSIC. For all catastrophe perils, the quota share agreement
provides ground-up protection effectively reducing our retention for catastrophe losses. Finally, effective
December 31, 2020, we entered into a quota share reinsurance agreement with Homeowners Choice Property
and Casualty Insurance Company, Inc (HCP). Under the terms of this agreement, HCP will provide 69.5%
quota share reinsurance on in-force, new and renewal policies in Connecticut, Massachusetts, New Jersey,
and Rhode Island effective December 31, 2020, until June 1, 2021.
Universal Insurance Holdings, Inc. NYSE: Actual - - - Our 2020-2021 reinsurance program meets and provides reinsurance in excess of the FLOIR’s requirements, Universal Insurance 12/31/2020
UVE which are based on, among other things, the probable maximum loss that we would incur from an individual Holdings 2020 10-K
catastrophic event estimated to occur once in every 100 years, based on our portfolio of insured risks and a Filing, UPICC's
series of stress test catastrophe loss scenarios based on past historical events. UPCIC retains $43 million for Reinsurance Program,
First event All States and $15 million for First event Non-Florida retention. All States first event tower expanded Page 11,46
to $3.36 with no co-participation in any of the layers, no limitations on loss adjustment expenses and no
accelerated deposit premiums. Assuming a first event completely exhausts the $3.36 billion tower, the second
event exhaustion point would be $1.343 billion. (Stockholders Equity as of 12/31/2020 is $449.262 mn)
Vienna Insurance Group AG WBAG: Actual - - - It is Group-wide policy that no more than EUR 50 million for the first two natural disaster events and EUR 20 VIG 2020 Annual Report, 12/31/2020
VIG million for each additional event can be placed at risk on a PML (probable maximum loss) basis. The maximum Reinsurance Section,
Group-wide retention per individual loss is less than EUR 15 million. Page 127
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