Sanders Re II Ltd. (Series 2024-2)

Allstate has returned to the catastrophe bond market and secured $74.5 million in additional multi-peril reinsurance protection through a new Sanders Re II Ltd. (Series 2024-2) cat bond issuance that has been relatively privately placed as zero-coupon notes.

We’re told by sources that Sanders Re II Ltd. has issued a $74.5 million tranche of Series 2024-2 Class A notes that have been sold to investors and the proceeds used to collateralize the underlying reinsurance agreement with Allstate.

At this stage we are not 100% certain what perils are covered under this latest catastrophe bond from Allstate, although it seems likely to provide reinsurance for multiple peril types for the insurer, as is typical with the Sanders Re cat bonds.

Allstate has not sponsored a single peril cat bond since 2008, but the insurer does issue US wide (ex-Florida) multi-peril cat bonds and then Florida focused multi-peril cat bonds throughout the year, so it seems safe to assume it will be one of those two types of arrangements.

In fact, given the time of year, we make the assumption this will be a new Florida multi-peril deal, as Allstate’s cat bond issuances in May have always tended to be of this kind and its main US nationwide reinsurance gets renewed for April 1, while its Florida reinsurance tower renewal is at June 1.

In terms of how the coverage is structured, it is safe to assume these are indemnity triggered cat bond notes, given every transaction from Allstate uses an indemnity trigger.

Also, we would expect them to provide per-occurrence protection, given Allstate’s aggregate cat bonds have tended to come to market earlier in the year, before its main April reinsurance renewal and its Florida cat bond coverage has always been per-occurrence in nature.

The $74.5 million of Series 2024-2 Class A principal-at-risk notes issued by Sanders Re II Ltd. are structured as zero-coupon notes, which Allstate has often opted for where the notes come with a higher risk level, or provide a shorter coverage term.

In this case, the $74.5 million of notes cover Allstate against losses for a one-year term, with maturity slated for June 9th 2025, we understand.

Unfortunately we do not have any of the risk or pricing metrics for this new Sanders Re issuance from Allstate, but we have added it to our Deal Directory and will update that entry as any further information becomes available.

We have made the assumption that Allstate has used its typical service providers to sponsor this cat bond, in terms of structuring agents, bookrunners and risk modelling.

Update 1:

We’ve now learned that this latest Florida-focused cat bond from Allstate covers named storm, earthquake, severe weather, fire, volcanic eruption and meteorite impact losses in the state.

The attachment probability of the $74.5 million of Series 2024-2 Class A notes is said to be 25.1% and the expected loss 16.32%.

Update – October 2024:

This zero-coupon Sander Re 2024-2 cat bond from Allstate is exposed to potential losses from hurricane Milton. The insurer estimated its losses from Milton at $100 million, which suggests this cat bond could be triggered, as it attaches above $30 million of losses in Allstate’s Florida reinsurance tower.

The notes have been heavily marked down in the secondary market, for bids as low as 5 cents on the dollar, suggesting a potentially meaningful recovery might be made by Allstate from this layer of cat bond backed reinsurance.