Sanders Re III Ltd. (Series 2022-1)

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Sanders Re III Ltd. (Series 2022-1) – At a glance:

  • Issuer: Sanders Re III Ltd.
  • Cedent / sponsor: Allstate
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and joint bookrunner. Goldman Sachs is joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: US named storm, earthquake, severe weather, wildfire, volcanic eruption, meteorite impact (excl. Florida)
  • Size: $550m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2022

Sanders Re III Ltd. (Series 2022-1) – Full details:

US primary insurer Allstate has returned with a new catastrophe bond and a new special purpose insurer (SPI) for this issuance, seeking $450 million or more across a mix of per-occurrence and annual aggregate reinsurance protection against losses from multiple U.S. perils (non-Florida).

For this first catastrophe bond of 2022 from Allstate, the insurer has registered a new Bermuda based special purpose insurer named Sanders Re III Ltd.

Newly registered SPI Sanders Re III Ltd. is targeting the issuance of three tranches of notes, we understand, with each tranche set to be sold to investors and provide collateral to underpin new reinsurance agreements between the structure and Allstate, effectively channelling the capital markets backed funding to support the insurers’ reinsurance tower.

The coverage will align with Allstate’s typical aggregate loss year, beginning April 2022 and running across four risk periods to the end of March 2026, we understand.

Like other recent cat bonds from Allstate, all three tranches of Series 2022-1 notes will provide the carrier with cover against losses from the named perils of US named storm, earthquake, severe weather, wildfire, volcanic eruption, meteorite impact, across all states except for Florida, all on an indemnity trigger basis.

Once again, the “other perils” class is no longer used in this new cat bond from Allstate, having featured for a number of years and so included a wider range of additional loss events, as the cat bond market continues its named peril focus.

Sanders Re III Ltd. will issue a Series 2022-1 tranche of Class A notes that are preliminarily sized at $200 million and will provide Allstate with per-occurrence reinsurance protection across a $550 million layer attaching at $3.75 billion of losses, sources said.

This Class A, occurrence tranche of notes, have an initial attachment probability of 0.99% and expected loss of 0.8607%, while being offered to investors with price guidance in a range from 3% to 3.5%.

Another $250 million or more of reinsurance protection is being sought across the currently unsized Class B and C tranches of Series 2022-1 notes that Sanders Re III Ltd. will issue.

The Class B tranche will offer both per-occurrence and annual aggregate protection to Allstate, covering a $500 million occurrence layer attaching at $3.75 billion of losses, and a $500 million aggregate layer attaching at $3 billion, with an aggregate deductible per-event of $50 million, we’re told.

The Class B tranche have an initial attachment probability of 0.93%, expected loss combined across the two covers of 0.7175% and are being offered to investors with price guidance in a range from 10.5% to 11%.

The final Class C tranche of Series 2022-1 notes to be issued by Sanders Re III Ltd. will provide annual aggregate cover across a $500 million layer attaching at $2.705 billion and with a $50 million per-event deductible, sources explained.

The Class C notes have an initial attachment probability of 0.9%, expected loss of 0.6255% and are being marketed with coupon price guidance in a range from 11.25% to 11.75%.

Update 1:

Allstate’s first catastrophe bond of 2022 has seemingly been well-received by investors, enabling the issuance to be finalised at $550 million in size.

But pricing settled at the mid and upper-ends of initial guidance, which suggests Allstate still found this attractive compared to the traditional reinsurance market at this time.

The Class A tranche remained at $200 million in size, but pricing was finalised at the top-end of 3.5%.

The Class B tranche was fixed at $175 million in size, while pricing was finalised at the mid-point of guidance, at 10.75%.

The Class C tranche of notes was also fixed at $175 million in size, while pricing was finalised at the top-point of guidance, at 11.75%.

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