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Original Risk: A Society for Change Agents

Allstate hit by $504m of catastrophe losses in May


U.S. primary insurer Allstate was hit by a higher than expected $504 million of pre-tax catastrophe losses over the course of May 2019, roughly half of which came from a single Midwest U.S. severe weather, tornado and hail event.

Allstate logoAdded to the $290 million of pre-tax catastrophe losses in April and $680 million during Q1 2019, Allstate’s cat loss bill for the year is rising steadily, but so far its reinsurance appears untouched.

Insurance and reinsurance broker Aon said recently that impacts from severe convective weather, thunderstorms, tornadoes and hail in the United States during May 2019 would drive around $2 billion or more of economic costs.

With Allstate revealing an over $500 million hit for the month alone, it seems likely the economic cost was quite a bit higher than the $2 billion and that the insurance and reinsurance sector loss from the month of May could be approaching that sort of level on its own, once all companies exposures were factored in.

Allstate said today that 14 catastrophe events during May drove the $504 million of pre-tax catastrophe losses ($398 million, after-tax), while around $31 million of positive prior event reserve re-estimates took the total impact for the month down to $473 million, pre-tax ($374 million, after-tax).

The single major event drove roughly half the total, as the impactful tornado, thunderstorm and hail weather drove a significant loss to the insurer in the Midwest region.

So, Allstate’s official April and May 2019 catastrophe losses now stand at $763 million, pre-tax ($603 million after-tax).

Analysts at Keefe, Bruyette & Woods (KBW) said that they raised their estimate for Allstate’s second-quarter cat burden to over a billion dollars as a result of the higher than expected May loss impact.

Allstate’s Sanders Re Ltd. (Series 2018-1) catastrophe bond, that provides annual aggregate reinsurance protection to the insurer, saw its annual risk period begin in April, with losses so far appearing aligned with modelled expectations for this layer of the insurers program.

Adding in Allstate’s recent cat bond, the $300 million Sanders Re II 2019-1 issuance from March, as well as other changes made to its reinsurance program, the firm’s nationwide aggregate protection now triggers at $3.54 billion of qualifying losses, so it’s still a long way before Allstate’s cat bond protection would be deemed at any risk.


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