Allstate begins aggregate year with $494m pre-tax catastrophe loss in April

US primary insurer Allstate has begun the new annual aggregate loss year for its catastrophe bonds with a costly $494 million of pre-tax catastrophe losses reported, as severe weather and tornadoes impacted the company.

Allstate has a number of outstanding cat bond tranches that provide it with annual aggregate property catastrophe reinsurance protection.

The insurers’ annual aggregate year begins on April 1st, aggregating losses across a 12-month period, so the April loss tally is a relatively expensive start.

It’s also not unexpected, given the severe convective storm (SCS) and tornado outbreaks that have been seen across the United States in recent weeks.

Whenever major SCS outbreaks occur, large nationwide insurers like Allstate are exposed and so too their reinsurance as a result.

For April 2024, Allstate has reported estimated catastrophe losses for the month of $494 million pre-tax, or $390 million after-tax.

Allstate went on to explain that of the $494 million, $491 million came from the last month, with the rest assumed to be due to some prior period loss creep.

The $491 million of catastrophe losses for events that occurred in April 2024 came from 11 specific events and Allstate said that approximately 80% of those losses related to four wind, hail or tornadic events.

While $491 million, pre-tax, is a relatively costly catastrophe loss burden for a single month, it’s worth noting that Allstate’s annual aggregate reinsurance, which solely comes from its Sanders cat bond program, does not attach until qualifying losses reach at least $3.6 billion.

You can view Allstate’s aggregate reinsurance tower and its other nationwide catastrophe reinsurance arrangements in this recent article.

It’s also worth noting that Allstate’s aggregate Sanders cat bonds that are now outstanding all feature a $50 million event deductible and the cat bonds with the lower franchise deductible amounts are all now off-risk for future events.

On a calendar year basis, after April, Allstate has now reported almost $1.23 billion of pre-tax catastrophe losses.

Recall that, as we had reported that qualifying catastrophe losses from the risk period that ended March 31st 2024 are now very close to attaching the coverage from Allstate’s last remaining cat bond with a franchise deductible, so there remains a chance of some loss of principal for the previous annual aggregate year.