Sanders Re III Ltd. (Series 2026-3)

Allstate came back to the catastrophe bond market and secured $30 million in additional multi-peril reinsurance protection through a new Sanders Re III Ltd. (Series 2026-3) cat bond issuance, that we understand has been relatively privately placed with investors as zero-coupon notes.

We’re told that Sanders Re III Ltd. has issued a $30 million tranche of Series 2026-3 Class A notes, that have been sold to investors and the proceeds used to collateralize the underlying reinsurance agreement with Allstate.

Given the time of year and the fact that, while privately marketed, this zero-coupon cat bond was placed and settled around the June 1st Florida reinsurance renewal, we assume it covers a layer of Allstate’s reinsurance tower for that state.

Details with this new Series 2026-3 cat bond are more limited though, given the privately placed nature of this latest catastrophe bond issuance sponsored by Allstate.

We are told these notes were less broadly marketed and offered to a relatively small group of cat bond fund investors.

Sanders Re III Ltd. has issued a $30 million tranche of Series 2026-3 Class A notes that have been sold to investors and the proceeds used to collateralize an underlying reinsurance agreement with Allstate.

We cannot be 100% certain of the covered perils and region, but given the timing as this 2026-3 tranche was priced around the same time as the 2026-2 Florida notes and settled on June 1st (aligned with its Florida reinsurance renewal), we make the assumption the $30 million of reinsurance will protect Allstate lower-down in its Florida reinsurance tower, against losses from multiple perils affecting its policies in the state.

In addition, we assume the coverage from the $30 million of Sanders Re III Series 2026-3 Class A cat bond notes will be indemnity trigger based and per-occurrence in nature, given that is how Allstate’s entire Florida reinsurance tower is structured (the insurer’s aggregate coverage has always been nationwide).

The $30 million of Series 2026-3 Class A principal-at-risk notes issued by Sanders Re III Ltd. are structured as zero-coupon notes and have been issued as Section 4(a)2 securities, we understand, which Allstate has typically opted to do where the notes come with a higher level of risk, or provide a shorter coverage term.

In this case, the $30 million of notes cover Allstate against losses for a one-year term, with maturity slated for June 7th 2027, we have learned.

The only other detail we have sourced on this new $30 million zero-coupon cat bond sponsorship from Allstate, is that the notes were priced at 65% of par value.

That implies a relatively high rate-on-line for the reinsurance protection, a rough equivalent might be thought of as around 35%, which implies these notes will occupy a lower-layer of Allstate’s Florida reinsurance tower for the year ahead, as has been seen when the insurer has sponsored zero coupon notes at the mid-year previously.

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