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Allstate reports wildfire losses. Has Laura creep triggered recoveries?


U.S. primary insurance giant Allstate has reported $339 million of pre-tax catastrophe losses for the month of September 2020, with the majority coming from wildfire activity in western states, while the carrier also reported it had strengthened its reserves for August’s hurricane Laura.

Allstate logoFor Allstate, September’s catastrophe losses came from some 20 events spread across the month that had estimated impact of $293 million, pre-tax ($231 million, after-tax).

Among these were eleven wildfire events that caused Allstate’s primary insurance book losses across California, Oregon and Washington, together accounting for roughly 65% of September’s estimated catastrophe losses.

Adding to the catastrophe losses from that month, Allstate also accounted for unfavorable reserve reestimates which were largely from $64 million of reserve strengthening, which importantly Allstate said was “net of anticipated reinsurance recoveries”, related to Hurricane Laura.

That gets the carrier to the $339 million, pre-tax ($268 million, after-tax) of catastrophe losses for the month of September.

Interestingly and perhaps related to the aforementioned reinsurance recoveries related to the hurricane Laura reserve strengthening, Allstate has now lowered its catastrophe loss figure for August quite considerably it seems.

Previously, Allstate had reported $145 million of pre-tax catastrophe losses for July and then a much higher $985 million for August 2020.

Hurricanes Laura and Isaias were blamed for the high toll from August, but now Allstate has said that its July and August losses total just $651 million, pre-tax ($514 million, after-tax), so with September the third-quarter 2020 total is now only $990 million, pre-tax ($782 million, after-tax).

Hurricane Laura was reported to be a $430 million pre-tax catastrophe loss, according to Allstate’s August release.

As the reserves had to be strengthened by $64 million “net of reinsurance recoveries” it suggests Allstate’s ultimate loss for Laura went above the $500 million mark, which it seems may have activated the carriers nationwide excess of loss catastrophe reinsurance program, as this attaches after a $500 million layer of retained losses.

So it is possible that reinsurance recoveries made against this, or possibly other towers, related to hurricane Laura, are the reason that the Q3 2020 cat loss total has declined as far as it has.

The only other possible reason we could see for the decline would be if Allstate was accounting for any wildfire subrogation by offsetting its current year cat losses with those benefits.

But at this stage it does seem more likely that reinsurance recoveries have been made for Laura after the reserves increased sufficiently to trigger one or more of Allstate’s programs, thus reducing the August cat loss load for the insurer.

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