Sanders Re II Ltd. (Series 2025-1)

Allstate has returned to the catastrophe bond market to sponsor what will be a twenty-first SandersRe  issuance for the company and the insurers twenty-third cat bond ever sponsored.

For its latest cat bond transaction, Allstate is using the Sanders Re II Ltd. vehicle for the issuance of four tranches of Series 2025-1 cat bond notes, we understand.

This deal will provide Allstate multi-peril and per-occurrence reinsurance, across all US states except for Florida.

The notes Sanders Re II Ltd. will issue, will be sold to capital market cat bond investors and the proceeds used to collateralize reinsurance agreements between the issuer and Allstate.

That reinsurance agreement will cover the insurer against personal lines property and auto losses from multiple US perils, specifically named storm, earthquake, severe weather, wildfire, volcanic eruption, or meteorite impact events.

The reinsurance protection from this Sanders Re II 2025-1 cat bond will cover Allstate on a per-occurrence and indemnity trigger basis, with two tranches of notes in-force for three years, the other two seeking longer five-year protection, and all coming on-risk from April 1st 2025.

All four tranches of Series 2025-1 notes that Sanders Re II is offering are as yet unsized, but we’re told the total limit sought is for $300 million or more in reinsurance across them.

All four tranches would attach their coverage above $4.25 billion of losses to Allstate, but occupying shares of different slices of its reinsurance tower.

These seem to be components of the fifth and sixth layers of Allstate’s reinsurance tower (perhaps extending into layers seven and eight), which last year were all filled out with single-year duration traditional reinsurance.

So this deal could increase the proportion of Allstate’s reinsurance tower that is funded in cat bond form, which would be a positive signal for the market. You can see Allstate’s last Nationwide tower here.

A Class A-1 tranche of three-year notes will participate in an almost $998.64 million layer excess of the $4.25 billion attachment and will have an initial attachment probability of 0.72% and an initial base expected loss of 0.6221%, while they are being offered with price guidance in a range from 4% to 4.25%, we are told.

A Class A-2 tranche of five-year notes will participate in that same layer and will have the same initial attachment probability of 0.72% and initial base expected loss of 0.6221%, while they are being offered with price guidance in a range from 4.25% to 4.5%.

A Class B-1 tranche of three-year notes will participate in an almost $2 billion layer excess of the $4.25 billion attachment and will have an initial attachment probability of 1.1% and an initial base expected loss of 0.8771%, while they are being offered with price guidance in a range from 4.5% to 4.75%, sources said.

A Class B-2 tranche of five-year notes will participate in that same layer and will have the same initial attachment probability of 1.1% and an initial base expected loss of 0.8771%, while they are being offered with price guidance in a range from 4.75% to 5%.

Update 1:

Allstate has more than doubled its target for protection from this new cat bond, with now $650 million of notes being offered.

The Class A-1 tranche of three-year notes are now $175 million in size. With their initial base expected loss of 0.6221%, they had been offered with price guidance in a range from 4% to 4.25%, which has now been fixed at 4%.

The Class A-2 tranche of five-year notes are also $175 million in size. They come with an initial base expected loss of 0.6221% and had first been offered with price guidance in a range from 4.25% to 4.5%, but we understand that is now at 4.25%.

The Class B-1 tranche of three-year notes are now $100 million in size. These have an initial base expected loss of 0.8771% and had been offered with price guidance in a range from 4.5% to 4.75%, which has again fallen now to 4.5%.

The final Class B-2 tranche of five-year notes are $200 million in size. These come with an initial base expected loss of 0.8771%, had first been offered with price guidance in a range from 4.75% to 5% and have now also seen their pricing fixed at the low-end of 4.75%, we are told.

Update 2:

Allstate has added another $100 million to the targeted size for its latest catastrophe bond, with now $750 million of notes being offered with this Sanders Re II 2025-1 deal.

The Class A-1 tranche of three-year notes remain $175 million in size. With their initial base expected loss of 0.6221%, their pricing remains fixed at the updated 4%.

The Class A-2 tranche of five-year notes also remain $175 million in size. They come with an initial base expected loss of 0.6221% and since the first update their pricing remains at 4.25%.

The Class B-1 tranche of three-year notes remain $100 million in size. These have an initial base expected loss of 0.8771% and their pricing also remains at the reduced 4.5%.

The final Class B-2 tranche of five-year notes are the ones that have upsized, from $200 million at the last update to now target $300 million of protection for Allstate. These come with an initial base expected loss of 0.8771%, and their pricing remains fixed at the low-end of 4.75%, we are told.

Update 3:

Allstate secured the upsized $750 million target for reinsurance from this Sanders Re II 2025-1 catastrophe bond issuance, increasing the size by 150% during its marketing and now making this the joint-largest cat bond from the company ever.

The Class A-1 tranche of three-year notes are $175 million in size and priced for a spread of 4%.

The Class A-2 tranche of five-year notes are $175 million in size and priced for a spread of 4.25%.

The Class B-1 tranche of three-year notes are $100 million in size and priced for a spread of 4.5%.

The final Class B-2 tranche of five-year notes are $300 million in size and priced for a spread of 4.75%.