Progressive added parametric SCS aggregate reinsurance for 2025

During its reinsurance renewals for 2025, US insurer Progressive added a novel parametric severe convective storm aggregate reinsurance arrangement, to provide it with responsive aggregate protection for qualifying thunderstorm, hail and tornado loss events.

In addition, Progressive also renewed its typical indemnity triggered catastrophe aggregate excess-of-loss reinsurance arrangement again for 2025, but opted for slightly less coverage under this arrangement perhaps as a result of adding the parametric SCS aggregate protection.

Progressive has been renewing and utilising aggregate reinsurance for a number of years and has benefitted from its protection.

The 2025 traditional aggregate catastrophe excess-of-loss reinsurance provides Progressive with $175 million of coverage across two layers (that’s down from $185m in the prior year).

A first retention layer threshold ranges from $450 million to $475 million, but excludes named tropical storm and hurricane losses. This first layer provides up to $75 million of protection.

A second retention layer has a threshold of $525 million, but this time includes losses from named tropical storms and hurricanes. This second layer provides up to $100 million of aggregate reinsurance protection.

More interesting though is the parametric SCS aggregate reinsurance that Progressive purchased for 2025, being the first time it has opted for a parametric product.

Progressive disclosed that the severe convective storm parametric loss aggregate coverage provides protection for specific severe thunderstorm events characterised by strong winds, heavy rain, large hail, thunder, lightning, and sometimes tornadoes.

The parametric aggregate reinsurance covers accumulated SCS losses above a retention of $665 million, and offers Progressive $15 million of coverage net of that retained loss amount.

It’s a small addition, which likely makes up for a slight reduction in traditional aggregate limit for 2025, but being parametric it may be possible to more closely calibrate this SCS aggregate reinsurance with Progressive’s actual loss experience of recent years, which could make for more utility and a more responsive protection for the insurer.

For its main catastrophe tower, Progressive has renewed $2 billion of coverage, with a retention threshold of $200 million for a storm outside of Florida and $75 million for a storm in Florida. Including FHCF protection, Progressive has around $2.2 billion of protection for a storm event in Florida, the company explained.