Sanders Re III Ltd. (Series 2026-2)

Allstate is back in the catastrophe bond market with an initial target to secure $200 million or more in multi-peril reinsurance protection focused on Florida through a new Sanders Re III Ltd. (Series 2026-2) catastrophe bond issuance.

For its latest cat bond, Allstate is utilising its Sanders Re III Ltd. issuance vehicle, which it last used for part of the nationwide cat bond issuance in March this year, we understand.

Sanders Re III Ltd. is offering two tranches of Series 2026-2 notes, which will be sold to capital market cat bond investors and the proceeds used to collateralize reinsurance agreements between the issuer and Allstate’s Florida underwriting entities.

As with previous Florida-focused cat bonds from Allstate, we understand the beneficiaries of the coverage will be the firms’ Florida-focused underwriting subsidiaries Castle Key Insurance, Castle Key Indemnity, as well as the National General and Northlight brand entities.

We understand the new Sanders Re III 2026-2 catastrophe bond is designed to provide those insurance subsidiaries with both a three and a four year source of fully-collateralized reinsurance, on a cascading indemnity and per-occurrence trigger basis.

One tranche of notes seeks three years of coverage, while a second seeks four years. With no other differences between the notes, it is possible Allstate opts to lock-in only one of the options, depending on investor response to the notes, we expect.

The target issuance size is currently $200 million, sufficient to fill the full reinsurance tower layer they will occupy.

The covered perils, for both tranches of notes, will be the typical Florida named storm, earthquake, severe weather, wildfire, volcanic eruption, and meteorite impact that Allstate has always covered with its Florida focused cat bonds, sources said.

Sanders Re III is offering a Series 2026-2 Class A-1 tranche of notes that would have a three year term to the end of May 2029 and a Series 2026-2 Class A-2 tranche of notes with a four year term to the end of May 2030.

Both tranches have exactly the same risk metrics and attachments, each occupying a $200 million layer excess of $30 million, with an initial attachment probability of 1.40%, an initial base expected loss of 1.07% and having spread price guidance in a range from 4.5% to 5.25%.

Update 1:

We’re told that Allstate has opted to only have the four year Class A-2 tranche of notes issued under its Sanders Re III Series 2026-2 catastrophe bond offering, prioritising the longer-duration reinsurance protection.

The Class A-2 notes remain $200 million in size, but their price guidance has fallen to a revised range of 4% to 4.5%.

Update 2:

We’re told that Allstate secured the $200 million of four year reinsurance from this new cat bond sponsorship, as the Class A-2 tranche of notes issued under its Sanders Re III Series 2026-2 offering were successfully priced at the low-end of reduced guidance.

The $200 million of Class A-2 notes were priced to pay investors an initial risk interest spread of 4%.