Allstate’s Q3 reinsurance recoveries approach $1 billion

US primary insurance carrier Allstate reported that its catastrophe reinsurance recoveries for the third-quarter of 2021 are now approaching $1 billion, suggesting the carrier has made additional recoveries through the period since it initially reported its losses from hurricane Ida.

Allstate had reported an estimated $1.4 billion gross loss from hurricane Ida in August, but said that would be reduced significantly to an estimated $631 million, pre-tax, with significant recoveries expected from its excess-of-loss reinsurance program.

It suggested reinsurance recoveries of as much as $769 million for hurricane Ida.

Allstate had already reported net catastrophe losses of $227 million for July and by the end of the third-quarter the catastrophe bill had risen to $1.3 billion net for the insurer.

As we said at the time, the gross catastrophe loss bill for the third-quarter is likely well above $2 billion and now Allstate has given an even clearer view of how impactful Q3 2021 has been for it, by disclosing reinsurance recoveries of almost $1 billion for the quarter.

Given the $1.3 billion net and pre-tax catastrophe loss bill, this suggests Allstate’s gross losses have risen towards $2.3 billion.

Given how low the July cat bill was at $227 million and the fact September only saw an additional $103 million of catastrophe losses from events that month, it’s safe to assume that Allstate’s gross loss for hurricane Ida has risen quite a bit higher than its initial estimate of $1.4 billion.

Within the Allstate homeowners business alone, the carrier disclosed that its Hurricane Ida gross losses were at $1.5 billion by the end of Q3, while the net loss from the hurricane was now considered $689 million.

Allstate further explained that its net loss from hurricane Ida takes into account reinsurance recoveries of $986 million and reinstatement premiums of $181 million.

Allstate reported a technical underwriting loss for all three of its main segments, with 38 points of catastrophe losses in the homeowners business a clear effect of hurricane Ida.

It means net income for the insurer is now down some almost 76% for the first nine-months of the year, with catastrophes earlier this year and Ida the main drivers, it seems.

Tom Wilson, Chair, President and CEO of The Allstate Corporation highlighted the importance of the reinsurance program in his comments, saying, “The catastrophe risk and return strategy also benefited results as nearly $1 billion of net reinsurance recoveries offset the impact of increased severe weather, including Hurricane Ida.”

The recoveries have largely come from Allstate’s excess-of-loss reinsurance, it appears, but its aggregate reinsurance deductible will also have been eroded by the heavy catastrophe loss activity, effectively heightening the risk for Allstate’s catastrophe bonds over the rest of their risk period, that runs to April 2022.