U.S. primary insurance giant Allstate continues to aggregate catastrophe losses at a faster rate in 2020, with its total reported pre-tax losses now having risen to almost $2.74 billion on the back of October’s losses which were largely from hurricane activity during the month.
Allstate reports that some 85% of its October catastrophe losses came from the impacts of recent hurricanes Zeta and Delta, which struck the United States during the month.
In total, catastrophe loss events aggregated to $324 million, pre-tax ($256 million, after-tax) from across 10 loss events during October 2020 for Allstate.
There was also an element of reserve re-estimates for prior quarter catastrophe loss events included in that as well.
The $345 million of pre-tax catastrophe losses for the month of October can now be added to Allstate’s $2.39 billion of reported pre-tax catastrophe losses for the first nine months of 2020.
Which takes its total pre-tax catastrophe losses to just slightly under $2.74 billion for the first ten months of 2020.
There is a good chance Allstate has already called on some reinsurance support for its losses suffered this year, as the carrier had cited anticipated reinsurance recoveries associated with hurricane Laura, the most costly U.S. named storm loss event of the year.
While Allstate’s catastrophe losses are aggregating fast in 2020, at the end of Q3 they were only running some $130 million ahead of the previous year.
But it is the ultimates for each event that matter since April 1st, when it comes to Allstate’s catastrophe bonds that are outstanding, so it’s never all that clear how much of the aggregate deductible beneath its Sanders Re catastrophe bonds has been eroded.
For Allstate to be able to claim on any of the reinsurance provided through the aggregate Sanders Re catastrophe bonds, its losses over an annual risk period need to aggregate above $3.576 billion, which is where the attachment point and trigger of its 2019-1 Sanders Re cat bond is set.
The risk period for these cat bonds begins in April and runs for a year, so it’s really just the losses since the beginning of Q2 that count, which now total around $2.525 billion, pre-tax.
So, the retained layer beneath the cat bonds reinsurance coverage has been significantly eroded so far by the end of October, but it does suggest roughly a $1 billion of deductible left to erode before that cat bond could be triggered.
Clearly there’s plenty of time for that to happen though and a severe winter storm season, or an early and severe start to the convective storm season, could easily see Allstate eat into its cat bond backed aggregate reinsurance layer.