US primary insurance carrier Allstate has lifted the target for its first catastrophe bond of 2022 to $550 million of multi-peril reinsurance protection, while the pricing for each tranche of Sanders Re III Ltd. (Series 2022-1) notes is set for the mid or upper-ends of guidance.
Allstate returned to the catastrophe bond market at the end of February, seeking at least $450 million of collateralized reinsurance from the new Sanders Re III issuance.
Using a new Bermuda domiciled issuer, Sanders Re III Ltd., Allstate is seeking multi-year and multi-peril reinsurance, on both a per-occurrence and aggregate basis with this new transaction.
Allstate is out in the market with a reinsurance placement at this time as well and we understand the insurer is likely to buy more protection across its program, with this cat bond looking set to support the firm’s ambition for more catastrophe reinsurance protection.
It’s particularly encouraging to see Allstate upsizing on its latest cat bonds size, while pricing for two tranches is set to be finalised at the top-ends of guidance, the third tranche at the mid-point, suggesting the cat bond market pricing on offer is deemed attractive compared to traditional reinsurance options.
So, this new Sanders Re III 2022-1 cat bond will provide Allstate with a $550 million source of four year collateralized and multi-peril catastrophe reinsurance protection to cover its US risks, except those in the state of Florida, we’re now told.
All three tranches of Series 2022-1 notes issued by Sanders Re III will provide Allstate with protection against losses from the named perils of US named storm, earthquake, severe weather, wildfire, volcanic eruption, meteorite impact, across all states except for Florida, all on an indemnity trigger basis.
A Series 2022-1 tranche of Class A notes remain sized at $200 million, to provide Allstate with per-occurrence reinsurance protection across a $550 million layer attaching at $3.75 billion of losses, with an initial attachment probability of 0.99% and expected loss of 0.8607%.
These notes were first offered to investors with price guidance in a range from 3% to 3.5% and we’re told pricing is set to finalise at the top-end of that guidance, for a coupon of 3.5%, we understand.
The Class B tranche of notes are now sized at $175 million, we’re told, to offer both per-occurrence and annual aggregate protection, across a $500 million occurrence layer attaching at $3.75 billion of losses, and a $500 million aggregate layer attaching at $3 billion, with an aggregate deductible per-event of $50 million.
The Class B tranche have an initial attachment probability of 0.93%, expected loss combined across the two covers of 0.7175% and were first offered to investors with price guidance in a range from 10.5% to 11%, but we’re now told that the coupon pricing is set to be finalised at 10.75%, so the mid-point of guidance.
Finally, the Class C tranche of notes is also sized at $175 million, sources said, to provide Allstate with annual aggregate cover across a $500 million layer attaching at $2.705 billion and with a $50 million per-event deductible.
The Class C notes have an initial attachment probability of 0.9%, expected loss of 0.6255% and were originally offered with price guidance in a range from 11.25% to 11.75%, but we’re now told the pricing is likely to settle at the top-end, for a coupon of 11.75%.
Allstate clearly finds the pricing attractive still, despite two tranches looking set to price at the upper-ends of their guidance.
As we explained in our last article on this new cat bond, Allstate’s new Sanders Re III Ltd. catastrophe bond will replace the soon to mature $500 million Sanders Re Ltd. (Series 2018-1), while also helping the insurer rearrange its coverage a little to fill gaps with the help of the capital markets.