The Hartford 2012 Annual Report Download - page 94

Table of Contents
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The Hartford utilizes reinsurance to transfer risk to affiliated and unaffiliated insurers. Reinsurance is used to manage aggregation of risk as well as to transfer
certain risk to reinsurance companies based on specific geographic or risk concentrations. All reinsurance processes are aligned under a single enterprise
reinsurance risk management policy. Reinsurance purchasing is a centralized function within Commercial, Consumer Markets and Wealth Management to
support a consistent strategy and to ensure that the reinsurance activities are fully integrated into the organization's risk management processes.
A variety of traditional reinsurance products are used as part of the Company's risk management strategy, including excess of loss occurrence-based products
that protect property and workers compensation exposures, and individual risk or quota share arrangements, that protect specific classes or lines of business.
The Company has no significant finite risk contracts in place and the statutory surplus benefit from all such prior year contracts is immaterial. Facultative
reinsurance is used by the Company to manage policy-specific risk exposures based on established underwriting guidelines. The Hartford also participates in
governmentally administered reinsurance facilities such as the Florida Hurricane Catastrophe Fund (“FHCF”), the Terrorism Risk Insurance Program
established under The Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) and other reinsurance programs relating to particular risks
or specific lines of business.
Reinsurance for Catastrophes
The Company has several catastrophe reinsurance programs, including reinsurance treaties that cover property and workers’ compensation losses aggregating
from single catastrophe events. The following table summarizes the primary catastrophe treaty reinsurance coverage’s that the Company has in place as of
January 1, 2013:
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


 
Principal property catastrophe program covering property
catastrophe losses from a single event
1/1/2013 to
1/1/2014
90%
$750 $350
Reinsurance with the FHCF covering Florida Personal Lines
property catastrophe losses from a single event
6/1/2012 to
6/1/2013
90%
128 [1] 48
Workers compensation losses arising from a single
catastrophe event [2]
7/1/2012 to
7/1/2013
95%
350 100
[1] The per occurrence limit on the FHCF treaty is $128 for the 6/1/2012 to 6/1/2013 treaty year based on the Company's election to purchase the
required coverage from FHCF. Coverage is estimated based on the best available information from FHCF, which was updated in January 2013.
[2] In addition, to the limit shown above, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, 80% of $30 excess
a $20 retention.
In addition to the property catastrophe reinsurance coverage described in the above table, the Company has other catastrophe and working layer treaties and
facultative reinsurance agreements that cover property catastrophe losses on an aggregate excess of loss and on a per risk basis. The principal property
catastrophe reinsurance program and other reinsurance programs include a provision to reinstate limits in the event that a catastrophe loss exhausts limits on
one or more layers under the treaties.
In addition to the reinsurance protection provided by The Hartford's traditional property catastrophe reinsurance program described above, the Hartford has
fully collateralized reinsurance coverages from Foundation Re III for losses sustained from qualifying hurricane loss events. Under the terms of the treaties, the
Company is reimbursed for losses from hurricanes using customized industry index contracts designed to replicate The Hartford's own catastrophe losses,
with a provision that the actual losses incurred by the Company for covered events, net of reinsurance recoveries, cannot be less than zero.
The following table summarizes the terms of the reinsurance treaties with Foundation Re III that were in place as of December 31, 2012:
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

Hurricane loss events affecting the Gulf and
Eastern Coast of the United States
1/27/2010 to
1/27/2014
90% of $200 in losses in excess of an index loss trigger
equating to approximately $1.2 billion in losses to The
Hartford
$180
Hurricane loss events affecting the Gulf and
Eastern Coast of the United States
2/18/2011 to
2/18/2015
67.5% of $200 in losses in excess of an index loss trigger
equating to approximately $1.4 billion in losses to The
Hartford
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As of December 31, 2012, there have been no events that are expected to trigger a recovery under the Foundation Re III reinsurance program and, accordingly,
the Company has not recorded any recoveries from the associated reinsurance treaties.
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