Allianz grows aggregate reinsurance and lifts catastrophe budget for 2022

After bearing a disproportionately heavy load from natural catastrophe losses in 2021, Allianz, a global insurance provider, has increased its aggregate reinsurance protection for 2022 and increased its budget for that year’s catastrophes.

The insurer reported net natural catastrophe losses, after reinsurance, of €1.637 billion, up dramatically from the €880 million witnessed in 2020, according to Allianz’s most recent full year 2021 financial figures, which were just published.

The industry saw above-average disaster losses last year, and Allianz was primarily affected by summertime flood and storm catastrophes that occurred across Europe.

Nat cats contributed 3.1%, up from 1.7% in 2020 and higher than the ten-year full-year average of 1.9%, to Allianz’s 93.8% combined ratio for 2021. Weather-related losses made up 1.2% of the total ratio for 2021 as opposed to 1.3% for 2020 when nat cat losses were excluded.

In order to lessen volatility as a result of the higher nat cat bill, Allianz has boosted its catastrophic budget for the upcoming months as well as renewed its aggregate reinsurance cover at a greater amount for 2022. Giulio Terzariol, the company’s chief financial officer (CFO), said during a conference call with analysts last week: “When we look at nat cat, internally, we look at nat cat and weather-related losses. Therefore, in the past, we had a budget of roughly 3% of premium for the total of nat cat and weather-related losses, and we have already increased this budget, in the last two years, to about 3.2% of premium. Now, 3.5 percentage points is how I see that for 2022.

He continued by saying that Allianz’s catastrophe allowance, which includes weather-related events, is now 50 basis points greater than it was three to four years ago.

At the most recent renewals, the company additionally boosted the size of its aggregate excess-of-loss reinsurance protection in an effort to further reduce the volatility of its property and casualty (P&C) book. This layer now has a value of €500 million after increasing by €200 million annually.

“So, if we see additional nat cats included in this 3.5 budget, I would argue, at 4.5 percentage point of load, that’s when the aggregate should come into play,” Terzariol said.

I will suggest that at 4.5%, we should be capped in terms of nat cats load because the aggregate will come into play. “Thus, think about that combined budget of nat cat and weather-related of 3.5%, which is 50 basis points greater compared to what we had a few of years ago,” he continued.