US primary insurance carrier Allstate is back with its latest catastrophe bond, a $350 million Sanders Re II Ltd. (Series 2021-2) transaction and this deal will provide the insurer with both multi-peril per-occurrence and aggregate reinsurance protection across a range of named perils.
Allstate has recovered on catastrophe bonds recently and has some gaps in its reinsurance arrangements after recent catastrophe loss events, including hurricane Ida, so it’s encouraging to see the company back in the market with another deal.
This latest transaction, its second of 2021, will see the Bermuda based special purpose insurer (SPI) Sanders Re II Ltd. seeking to issue two tranches of notes, the sale of which will provide collateral to underpin new reinsurance agreements between the structure and Allstate, to channel the capital markets backed funding to its reinsurance tower.
The currently slated $350 million of notes will provide Allstate with multi-peril US reinsurance protection across a three year and four month term, with the first four months only covering the insurer on a per-occurrence basis and then after that the remaining three years providing it with both per-occurrence and aggregate reinsurance protection, sources told Artemis.
The Series 2021-2 notes issued by Sanders Re II will provide Allstate with cover against losses from the named perils of US named storm, earthquake, severe weather, wildfire, volcanic eruption, meteorite impact, across all states except for Florida, all on an indemnity trigger basis.
There’s been a slight tweak to the terms with Allstate’s latest cat bond, in that all the perils are explicitly named, where as in recent years Allstate’s Sanders Re cat bonds have all featured an “other perils” class, which has included a wider range of additional loss events.
With the insurance-linked securities (ILS) market and more broadly reinsurance and retrocession, continuing to tighten up on a named peril focused basis, especially in aggregate covers, this seems to be a reflection of that and is encouraging to see.
Sanders Re II Ltd. will offer a $200 million tranche of Class A notes will provide Allstate with per-occurrence reinsurance protection right through the more than three year risk period, attaching at $3.75 billion of losses and exhausting at $4 billion, we understand.
The Class A notes will have an initial expected loss of 0.8457% and are being offered to investors with coupon guidance in a range from 3% to 3.75%.
Meanwhile, a $150 million Class B tranche of notes will provide Allstate with per-occurrence protection for the first four months, up to the end of April 2022 and then both per-occurrence and annual aggregate reinsurance across the next three years, so aligning the coverage term with the insurers aggregate reinsurance tower.
The Class B tranche of notes attach at the same $3.75 billion while on a per-occurrence basis, we understand, exhausting at $3.975 billion, but then also attach at $2.5 billion on an aggregate basis and span a $500 million layer to $3 billion for those three annual risk periods.
The Class B notes are offered with price guidance in a range from 2.75% to 3.25% for the initial per-occurrence only term and then 11.5% to 12.5% for when the aggregate reinsurance protection also kicks in.
These are both relatively high up in Allstate’s reinsurance tower, for catastrophe bonds.
There is some room for both tranches to upsize, should investor demand allow.