Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Allstate returns for $250m Florida focused Sanders Re III cat bond


US primary insurance player Allstate is back in the catastrophe bond market seeking protection for its Florida businesses, with a target for at least $250 million of multi-peril collateralized reinsurance from this Sanders Re III Ltd. (Series 2023-2) issuance.

allstate-floridaAllstate often sponsors a Florida focused catastrophe bond in May, having last done so a year ago and before that in 2020, 2017 and 2014.

Allstate has now successfully sponsored a catastrophe bond issuance 17 times, since it first entered the market in 2007.

These days, the Sanders Re cat bond programme is an annual feature of the market, with the insurer sponsoring as many as three issues in a year, as it did in 2022.

Allstate’s most recent cat bond was a $250 million US-nationwide excluding Florida multi-peril Sanders Re III Ltd. (Series 2023-1) issued in March.

Details of every cat bond from Allstate can be found in our Deal Directory.

We understand that for this latest Sanders Re catastrophe bond, Allstate is using its Bermuda based special purpose insurer (SPI) Sanders Re III Ltd.

The SPI will target the issuance of two tranches of Series 2023-2 cat bond notes, aiming for at least $250 million of Florida focused catastrophe reinsurance protection through a coupon paying more remote tranche of notes, while also testing market appetite for a far riskier zero-coupon layer with a one-year term, we’re told.

Allstate is targeting fully-collateralized reinsurance protection against the perils of Florida named storm, earthquake, severe weather, wildfire, volcanic eruption, and meteorite impact with this new Sanders Re III 2023-2 catastrophe bond.

As with all of its Florida focused cat bonds, it’s assumed the ultimate beneficiaries of the reinsurance protection will be Allstate’s Florida-focused underwriting subsidiaries Castle Key Insurance, Castle Key Indemnity, as well as National General and Northlight brand entities.

Sanders Re III Ltd. is seeking to issue two tranches of notes, with at least $250 million of protection being sought.

The first, a Class A tranche of notes, is the coupon structured issuance, designed to provide Allstate $250 million or more in indemnity, per-occurrence based protection, structured to cascade as other reinsurance beneath is eroded, across a three-year term to the end of May 2026.

The Class A notes have an attachment point at $360 million, exhausting at $660 million of Allstate’s Florida reinsurance tower, we’re told, giving them an initial attachment probability of 1.09%, an initial expected loss of 0.91% and they are being offered to investors with spread price guidance in a range from 7.75% to 8.50%, sources said.

The second layer, a Class B zero-coupon tranche of notes, are far riskier and are designed to provide Allstate an as yet unsized amount of indemnity and per-occurrence protection, across the same covered perils in Florida and running to the end of May 2024.

The Class B notes have a much lower attachment point at just $40 million, exhausting at $110 million of Allstate’s Florida reinsurance tower, we understand, which gives them an initial attachment probability of 26.5% and an initial expected loss of 19.08%. We’re told there is no price guidance for these zero-coupon notes, at this time.

It will be interesting to see whether Allstate can place those zero-coupon notes in the cat bond market, or whether traditional or collateralized reinsurance satisfies that need, as these lower-layers of Florida towers are out of favour with many traditional and ILS capacity providers.

Whether the Class B layer is placed successfully or not, it is encouraging to see Allstate looking to upsize on its soon to mature $200 million 2020 Florida-focused cat bond with this new deal.

You can read all about this Sanders Re III Ltd. (Series 2023-2) from Allstate and every other catastrophe bond issuance in the extensive Artemis Deal Directory.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

Artemis ILS Asia 2023 - Insurance-linked securities conference in Singapore

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.