Home Supporting structure RLI Corp expands catastrophe reinsurance to support real estate growth

RLI Corp expands catastrophe reinsurance to support real estate growth


RLI Corporation, a traditional specialty insurance and reinsurance company, has expanded its property underwriting in recent quarters as it seeks to expand into this firming market, resulting in an increased need for reinsurance against disasters.

RLI expanded its property underwriting in 2021, underwriting nearly $348 million in gross premiums throughout the year, an increase of nearly 30% from the nearly $269 million in risk premiums of properties subscribed in 2020.

In the fourth quarter of 2021, RLI continued to expand its real estate portfolio, as rates continued to rise and insurers COO Jen Klobnak explained that this growth now means changes in the way the company manages its risk.

RLI found that fourth quarter catastrophe losses were lower for the company, resulting in improved performance of the property portfolio.

Klobnak explained on the insurers’ earnings call this week: “With respect to real estate, this segment drove the difference in our results due to the absence of catastrophe-related losses in the fourth quarter of 2021, compared to the previous fourth quarter.

“The segment produced a combined ratio of 69% and grew 23%. Rates increased 7% for the quarter.

“The market in this segment continues to face losses, which we believe will support continued rate increases. Competitors are selling shorter limits than in the past, allowing us to participate as a seller of ‘assurance.

She went on to explain that on the excess and surplus lines side, growth was even more impressive, with RLI increasing its E&S property portfolio by 34% in the fourth quarter.

“We have achieved an increase in rates, witnessed an increase in building valuations and seen a reduction in capacity from our MGA and carrier competitors. All of these changes enhance our opportunities in this area and all products in this segment saw increased submissions this quarter and for the full year. All of these products also contributed to the 29% premium growth for the year,” Klobnak said.

With all this growth of inward ownership lines, RLI found it had to manage outward risk as well.

Klobnak said, “To support property growth, we purchased $100 million of additional catastrophe reinsurance limit beginning January 1.”

She added that during the January renewals, RLI renewed its reinsurance treaties in a structure largely the same as in previous years.

Renewal rates for RLI’s reinsurance program increased by about single digits, she said, but added: “We have been actively using reinsurance for the past two years, so we expected to see these cost increases”.

On the casualty side, Klobnak said reinsurance renewal rates were also up 5% to 10%.

So, RLI Corporation is another example of a company that is growing internally and extending its reinsurance outwards to support this and manage possible losses in its expanding real estate portfolio.

These pockets of new demand have been welcomed by reinsurers and ILS fund managers, as by helping insurers grow their business, these programs can continue to grow and provide long-term sources of risk-related returns, for those who subscribe to them.

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