US primary insurance carrier Allstate has added another $227 million of pre-tax catastrophe losses for the month of July 2021, which is much higher than the prior year’s $145 million.
Allstate had closed out the second-quarter of 2021 with $952 million of pre-tax catastrophe losses, which was a relatively high quarter for the company, with large hail loss events in April and May the main drivers, as well as some loss creep from Q1 severe weather events including winter storm Uri.
The third-quarter has begun with a higher toll than a year ago, as Allstate has reported 18 specific weather related catastrophe events, that together drove the $227 million of pre-tax losses, which would be $179 million after-tax.
The 18 catastrophe events in July 2021 cost Allstate $211 million pre-tax, while the other $16 million came from loss creep that drove unfavorable prior period reserve estimates.
As a reminder, Allstate has been recovering on the reinsurance provided by its $300 million Sanders Re II 2019-1 catastrophe bond transaction this year.
The main driver was winter storm Uri and the Texas freezing weather, and after the second-quarter, erosion of the $300 million catastrophe bond had reached $253 million, with just $47 million of principal remaining to cover any continuation of the loss creep and development Allstate has been experiencing from this event.
It’s possible that the prior period development reported for July could exacerbate this further, although we cannot be sure.
Allstate’s aggregate cat bond coverage trigger is now higher as a result, with now over $4 billion of qualifying losses required in the new annual risk period to bring any fresh claims on either the remainder of its 2019 notes, or on its Sanders Re 2020 cat bond.
Adding up the pre-tax Q2 catastrophe losses with July takes current risk period losses to almost $1.18 billion, meaning there is still some way to go before losses this year would trigger fresh aggregate reinsurance recoveries under Allstate’s nationwide tower.