U.S. primary insurance giant Allstate has reported $632 million pre-tax of catastrophe losses from April 2020, largely driven by severe convective storms and severe weather events.
It’s a heavy start to the year for the annual aggregation of losses against Allstate’s reinsurance provided by its Sanders Re catastrophe bonds.
The annual risk period for a number of Allstate’s aggregate catastrophe bonds begins from April, so the insurer has reinsurance protection that this $632 million of pre-tax losses will begin to aggregate towards triggers for.
Any Allstate reported catastrophe losses that occur during the annual risk period that begins April 1st can be aggregated to erode the retention for these cat bonds and qualify for coverage under the aggregate limit.
The retention levels are high though, so for Allstate to access any of the reinsurance provided by these catastrophe bonds through the aggregate coverage sections, its losses during the annual risk period would need to reach above $3.576 billion, which is where the 2019-1 Sanders Re cat bond can attach.
So there’s a way to go for any of Allstate’s cat bonds to be threatened, but for one month this is a relatively high level of catastrophes to start the aggregate year.
Allstate said that six catastrophe events occurred in April, driving the $632 million, pre-tax ($499 million, after-tax) of losses during the month.
The six designated catastrophe events cost Allstate an estimated $627 million, pre-tax ($495 million, after-tax), while the rest of April’s total was from unfavorable prior period reserve reestimates.
Allstate said that around 55% of the catastrophe losses came from just two severe wind and hail events, that caused widespread impacts across roughly half of U.S. states.
Allstate recently added around $221 million of new protection to its core nationwide excess of loss catastrophe reinsurance program, with the capital markets playing an important role through the Sanders Re II catastrophe bond.