Company: AFGC
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001042046-25-000011
Chunk: 77

Company: AMERICAN FINANCIAL GROUP INC
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1
Chunk 77
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   AFG has taken steps to limit its exposure to catastrophes (including those resulting from hurricanes, windstorms, tornadoes, floods, hailstorms, earthquakes, explosions, fires and acts of terrorism and civil unrest) through individual risk selection, including minimizing coastal and known fault-line exposures, and purchasing catastrophe reinsurance. In addition, AFG purchases catastrophe reinsurance for its workers’ compensation businesses. Although the cost of catastrophe reinsurance varies depending on exposure and the level of worldwide loss activity, AFG continues to obtain reinsurance coverage in adequate amounts at acceptable rates.

In January 2025, AFG’s property and casualty insurance subsidiaries renewed their catastrophe reinsurance coverages. For AFG’s U.S.-based operations, the Company placed $205 million of coverage in excess of a $70 million per event primary retention in the traditional reinsurance markets.

In addition to traditional reinsurance, AFG has historically purchased coverage through a catastrophe bond structure. AFG’s most recent such coverage expired on January 7, 2025 and management expects to place a new catastrophe bond or purchase other reinsurance protection during the second quarter of 2025 that attaches at $275 million.

The commercial marketplace requires large policy limits ($25 million or more) in several of AFG’s lines of business, including certain property, environmental, aviation, executive and professional liability, umbrella and excess liability, and fidelity and surety coverages. Since these limits exceed management’s desired exposure to an individual risk, AFG generally enters into reinsurance agreements to reduce its net exposure under such policies to an acceptable level. Reinsurance continues to be available for this large line capacity exposure with satisfactory pricing and terms.

In addition to the catastrophe and large line capacity reinsurance programs discussed above, AFG purchases reinsurance on a product-by-product basis. AFG regularly reviews the financial strength of its current and potential reinsurers. These reviews include consideration of credit ratings, available capital, claims paying history and expertise. This process periodically results in the transfer of risks to more financially secure reinsurers. Substantially all reinsurance is ceded to companies with investment grade S&P ratings or is secured by “funds withheld” or other collateral. Under “funds withheld” arrangements, AFG retains ceded premiums to fund ceded losses as they become due from the reinsurer. Recoverables from the following companies were individually between 5% and 12% of AFG’s total property and casualty reinsurance recoverable (including prepaid reinsurance premiums and net