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Sanders Re III Ltd. (Series 2022-3)

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Sanders Re III Ltd. (Series 2022-3) – 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: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2022

Sanders Re III Ltd. (Series 2022-3) – Full details:

Allstate is back in the catastrophe bond market with its third issuance of the year, a currently $100 million single tranche of notes deal with which the insurer is seeking nationwide US, ex-Florida, multi-peril reinsurance protection.

The third cat bond of 2022 from Allstate will see the carriers’ Bermuda based special purpose insurer (SPI) Sanders Re III Ltd. looking to issue a single tranche of Class A Series 2022-3 notes, the sale of which will provide collateral to underpin new reinsurance agreements between the issuer and Allstate, channelling the capital markets backed funding into its reinsurance tower.

The notes will provide Allstate with a source of US nationwide, excluding Florida, coverage against losses from US named storms, earthquakes, severe weather events, wildfires, volcanic eruptions and meteorite impacts, all on a per-occurrence and indemnity trigger basis.

Losses from Allstates personal lines property and auto insurance businesses, including from affiliates, are covered.

The coverage will run across roughly four years and four months, with a short risk period running to April 2023, then four annual risk periods running beyond that, to the end of March 2027.

The targeted at least $100 million of Series 2022-3 Class A notes that Sanders Re III is set to issue will attach their reinsurance coverage at $3.75 billion of losses to Allstate, covering a percentage of a $400 million layer of Allstate’s tower, to exhaustion at $4.15 billion, we understand.

The initial modelled, attachment probability is said to be 0.76%, while the initial expected loss for the notes, at the base case, is 0.6238%.

The notes are being offered to cat bond funds and investors with price guidance in a range from 5.25% to 5.75%, sources said.

Update 1:

We are told that Allstate has lifted its target issuance size for this new cat bond deal, to between $100 million and $125 million, demonstrating its appetite for cover.

At the same time, the pricing of the notes has been lifted by roughly 14% from the initial mid-point of guidance, to a coupon of 6.25%.

At that level, the multiple-at-market would be around 10 times the initial base expected loss, a particularly high multiple even for a cat bond issued since hurricane Ian.

Update 2:

In the end, Allstate settled for $100 million of catastrophe reinsurance protection from its latest cat bond issuance, with the Sanders Re III 2022-3 transaction failing to upsize.

The pricing was finalised at the elevated level of a 6.25% coupon, so roughly 14% above the initial mid-point of price guidance.

As a result, this issuance offers investors a multiple-at-market of 10 times the initial base expected loss.

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