U.S. primary insurance company Allstate is back with a new Sanders Re Ltd. (Series 2017-1) catastrophe bond issue, a $300 million U.S. multi-peril transaction, the insurers first cat bond since its attempted 7-year deal failed to be issued in 2015.
Allstate has sponsored four Sanders Re cat bonds previously, although only three were successfully issued. It first in a $350m Sanders Re Ltd. (Series 2013-1) in 2013, followed by a $750m Sanders Re Ltd. (Series 2014-1) and $200m Sanders Re Ltd. (Series 2014-2) both in May 2014.
Allstate then attempted to sponsor what would have been the longest-duration catastrophe bond seen, a seven-year Sanders Re Ltd. (Series 2015-1) transaction, but failed to get the necessary investor support so turned to the traditional reinsurance market where it secured similar cover.
Now, Allstate is back with a new Sanders Re transaction, targeting at least $300 million of fully collateralised reinsurance protection from a Series 2017-1 issuance.
The Sanders Re 2017-1 cat bond will cover Allstate and subsidiaries against losses from a range of U.S. perils, including named storms, earthquakes, severe thunderstorms, volcanic eruption and meteorite impacts.
Coverage is for all U.S. states except for Florida and New Jersey, we understand, although we’re told New Jersey coverage can be added at a reset if Allstate should choose to.
A single tranche of Class A notes will be sold to investors to collateralise the underlying reinsurance deal, providing Allstate with coverage on an indemnity and per-occurrence basis across a four and a half-year risk period, running to November 2021, so this deal actually covers five U.S. hurricane seasons for the insurer.
The Class A notes have an attachment probability of 1.12% and an expected loss of 0.86%, we’re told, and are being marketed to cat bond and ILS investors with price guidance of 3.25% to 3.75%, which reflects a reasonably high multiple in the current market.
It’s encouraging to see Allstate return to the catastrophe bond market after the difficulty seen in getting the 2015 Sanders Re deal to market and with a deal that pushes the duration a little. With catastrophe bond pricing attractive and ILS investor appetite strong the timing is perhaps not that surprising though.
We understand that the Sanders Re Ltd. (Series 2017-1) catastrophe bond is targeted for completion in late March. We will update you as it comes to market and you can read about this and every other cat bond in the Artemis Deal Directory.