The US winter storms, particularly occurring in Texas and Oregon, generated massive catastrophe losses.
The Progressive Corporation recorded reinsurance recovery of $40 million in February as a result of the extreme winter weather that struck southern regions of the United States.
Insurance damages left behind by the extreme and uncommon weather in the south were substantial.
During February 2021, Progressive’s catastrophe losses were recorded at $87 million. This translated to a net catastrophe loss ratio of 2.7 percent of the insurer’s earned premiums, including the reinsurance recovery impact.
The vast majority of the catastrophe losses experienced by the insurer was the outcome of the winter storms that struck Texas and Oregon, as well as much of the rest of the south eastern United States.
Though the final tallies have yet to be made regarding the size of the extreme weather event and what its cost will be – due to the complexity of its impact – initial insurance and reinsurance industry losses have been estimated to be greater than $10 billion. That figure is comparable to the impact of Hurricane Harvey in 2017.
For Progressive, it has meant that the insurer has had a $40 million reinsurance recovery.
The insurer experienced a significant impact due to the event and it received the recovery under its Property segment’s occurrence excess of loss reinsurance program. The reason is that the losses that the insurer faced as well as certain allocated loss adjustment expenses (ALAE) totalled more than the $80 million retention.
February’s catastrophe losses also drove the insurer’s combined ratio up by 1.1 percent year-over-year, bringing it to 91.4 percent.
Morgan Stanley analysts pointed out that even though Progressive’s February earnings expectations were missed due to the catastrophe losses, year-over-year, the core combined ratio still rose to reach 88.9 percent as a result of a decreased 68.3 percent core loss ratio. The analysts stated that, aside from the reinsurance recovery, the insurer’s February loss ratio benefited from “continued lower accident claims frequency associated with lower driving levels.”