Allstate estimates $633m of April catastrophe losses

by Artemis on May 19, 2016

U.S. primary insurance firm Allstate has announced estimated April 2016 catastrophe losses of $633m, with one of the Texas hail storm events causing more than half of the total.

The April catastrophe loss impact for Allstate came from eight separate events, which together are estimated to have cost the insurer the $660m, pre-tax, which is $411m after-tax, but this was partially offset by $27m of favourable reserve developments from March.

The April catastrophe loss toll for Allstate comes on the heels of $827m of first-quarter catastrophe losses, demonstrating the severe impact that convective weather and related hail, floods and high winds have had on some U.S. insurers so far this year.

More than half of Allstate’s April catastrophe losses are due to just one severe hail event that occurred from the 10th to 12th of April 2016 in Texas.

The high level of Allstate’s April catastrophe loss estimate suggests that many other insurers will also see catastrophe losses above expectation for the month.

That will no doubt result in some erosion of many primary insurers reinsurance retentions and perhaps result in some claims flowing through to reinsurers and any collateralised reinsurance or ILS funds with exposure.

Allstate, given its size and capital reserves, does retain a significant proportion of its catastrophe losses and so given its reinsurance arrangements this may not result in a hit of any magnitude.

It’s nationwide per-occurrence excess catastrophe reinsurance coverage has a $500m retention, so while losses are clearly above this so far this year it’s possible that no single occurrence will have eaten through the retention into Allstate’s first layer of cover.

But it does suggest a hit will be coming through smaller insurers, who retain less risk and use quota share or aggregate reinsurance structures, which are most likely to begin to pay out after the convective losses and other U.S. weather events this year.

Allstate has managed to reduce its reserves for March catastrophe losses, as favourable re-estimates relating to lower than anticipated reported claims and severity for March 2016 catastrophes resulted in a 6% change in the previously reported estimated of $638m of March cat losses. So that means Allstate should recover around $27m of the March loss tally.

Analysts at KBW commented; “We expect significant weather-related 2Q16 losses for most U.S. and Canadian auto and property insurers, largely retained among primary carriers, with some reinsurance exposure from regional carriers (who typically buy lower attachment points) and insurers exposed to recent Canadian wildfires.”

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