US primary insurance giant Allstate has reported a relatively brisk start to its aggregation of catastrophe losses for the second-quarter, with pre-tax catastrophe losses for April and May alone totalling $752 million.
The month of April 2022 saw Allstate reporting $316 million of catastrophe losses before tax, $299 million came from fourteen events, primarily wind, hail and tornados in Texas and the southeast US, as well as some unfavourable prior period loss development.
For May 2022, Allstate’s catastrophe losses were higher, at $436 million before tax ($344m after).
Catastrophe losses suffered in May by Allstate included 14 loss events, largely from wind and hail in Texas, the Midwest and also Canada, which together made up $423 million of the pre-tax total.
The remainder of the May catastrophe loss bill was again due to prior period reserve development on catastrophes from previous months.
As a result, Allstate said that its catastrophe losses for April and May 2022 totalled $752 million, pre-tax.
Allstate’s aggregate nationwide catastrophe reinsurance arrangements, which all come from a range of its Sanders catastrophe bond issues, attaches at just over $2.7 billion of losses.
The risk period for all of the in-force Allstate sponsored aggregate reinsurance providing cat bonds begins on April 1st each year.
So these two months are the start of aggregation towards the attachment point for the lowest down layers of Sanders Re aggregate cat bond notes, at just over $2.7 billion.
As a result, there is a long way to go, but the $752 million of pre-tax cat losses will undoubtedly have eroded some of the cat bonds buffering retention layers.
It’s going to be a little challenging going forwards to identify how much erosion has occurred to all Allstate’s cat bonds, as some now use a $50 million per event deductible, where previously some only had a $1m franchise deductible in place.
It is those aggregate cat bonds with the franchise deductible that should see losses accumulate quickest, given more of the smaller catastrophe loss events will qualify under their terms.
At its recent reinsurance renewals and cat bond issues, Allstate has been making this transition to event deductibles for its newer aggregate catastrophe bonds, the upshot of which has been an ability to bring down the attachment point somewhat.
Because of this, Allstate now has aggregate cat bonds attaching lower down, at $2.705 billion that have event deductibles, as well as aggregate cat bonds sitting higher up in its reinsurance tower with these older franchise deductible arrangements.