US primary insurance carrier Allstate is in the catastrophe bond market for the first time in 2022, seeking $450 million or more of reinsurance protection across both per-occurrence and annual aggregate multi-peril protection, with a Sanders Re III Ltd. (Series 2022-1) issuance.
For its first new catastrophe bond of 2022, we’re told that Allstate has established a brand new special purpose insurer (SPI) in Bermuda, named Sanders Re III Ltd.
Allstate tends to set up new issuance structures every few years, but in this case the recent exhaustion of a $300m Sanders Re II cat bond may have driven the insurer to come with a new vehicle this year.
Allstate is targeting four years of collateralized and multi-peril catastrophe reinsurance protection from this new cat bond deal, to cover its US risks except those in the state of Florida.
Newly registered SPI Sanders Re III Ltd. is targeting the issuance of three tranches of notes, we understand, with each tranche set to be sold to investors and provide collateral to underpin new reinsurance agreements between the structure and Allstate, effectively channelling the capital markets backed funding to support the insurers’ reinsurance tower.
The coverage will align with Allstate’s typical aggregate loss year, beginning April 2022 and running across four risk periods to the end of March 2026, we understand.
Like other recent cat bonds from Allstate, all three tranches of Series 2022-1 notes will provide the carrier 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.
Once again, the “other perils” class is no longer used in this new cat bond from Allstate, having featured for a number of years and so included a wider range of additional loss events, as the cat bond market continues its named peril focus.
Sanders Re III Ltd. will issue a Series 2022-1 tranche of Class A notes that are preliminarily sized at $200 million and will provide Allstate with per-occurrence reinsurance protection across a $550 million layer attaching at $3.75 billion of losses, sources said.
This Class A, occurrence tranche of notes, have an initial attachment probability of 0.99% and expected loss of 0.8607%, while being offered to investors with price guidance in a range from 3% to 3.5%.
Another $250 million or more of reinsurance protection is being sought across the currently unsized Class B and C tranches of Series 2022-1 notes that Sanders Re III Ltd. will issue.
The Class B tranche will offer both per-occurrence and annual aggregate protection to Allstate, covering a $500 million occurrence layer attaching at $3.75 billion of losses, and a $500 million aggregate layer attaching at $3 billion, with an aggregate deductible per-event of $50 million, we’re told.
The Class B tranche have an initial attachment probability of 0.93%, expected loss combined across the two covers of 0.7175% and are being offered to investors with price guidance in a range from 10.5% to 11%.
The final Class C tranche of Series 2022-1 notes to be issued by Sanders Re III Ltd. will provide annual aggregate cover across a $500 million layer attaching at $2.705 billion and with a $50 million per-event deductible, sources explained.
The Class C notes have an initial attachment probability of 0.9%, expected loss of 0.6255% and are being marketed with coupon price guidance in a range from 11.25% to 11.75%.
Allstate’s new Sanders Re III Ltd. catastrophe bond looks like it is designed to replace the soon to mature $500 million Sanders Re Ltd. (Series 2018-1), while also helping the insurer rearrange its coverage a little to fill gaps with the help of the capital markets.
There’s plenty of room for this new cat bond to upsize, should the insurer so choose and cat bond market pricing prove conducive for the carrier. We’ll update you as it comes to market.