Allstate’s cat losses rise to $2bn YTD, on hail, storms and creep

In the month of July U.S. primary insurance giant Allstate was again hit by fresh losses from convective storm activity and in particular hail damage, while loss creep from the same type of events that struck in previous months was also accounted for.

Allstate reported estimated catastrophe losses for the month of July 2019 amounting to $235 million before tax ($186 million after-tax).

That took the insurers total reported pre-tax catastrophe losses to near $2 billion by the end of July.

July saw 10 separate catastrophe events drive $186 million of losses before tax ($147 million after-tax).

One particularly severe hail event that mainly impacted Colorado drove roughly 40% of Allstate’s July estimated catastrophe losses.

The rest of the July catastrophe loss tally was driven by unfavourable reserve re-estimation, or loss creep, from prior period catastrophe losses.

Loss creep drove reserve strengthening for a severe weather event that occurred in May and included tornadoes, wind and hail, in the month of July 2019.

The previous month of June saw Allstate report $311 million of impacts, which took its second-quarter catastrophe loss bill to $1.07 billion before tax.

Added to the first-quarter of 2019’s $680 million and adding on the $235 million July total, takes Allstate’s catastrophe losses for the first seven months of 2019 to over just under $2 billion.

Severe convective weather outbreaks and in particular hail events have become a major driver of losses above expectations in insurance and reinsurance, regularly cited as the reason for earnings misses and greater than expected catastrophe costs.

Allstate had cited hail storms in Texas as also being a driver of its catastrophe losses in the first-quarter of this year.

Despite the rising tally, Allstate’s catastrophe losses still remain well below where reinsurance capital providers need to start to worry.

Allstate’s Sanders Re Ltd. (Series 2018-1) catastrophe bond provides annual aggregate reinsurance protection across a risk period that only began in April. So far, Q2 losses are aligned with modelled expectations for this layer of the insurers’ reinsurance tower.

Including the recent cat bond as well from Allstate, the $300 million Sanders Re II 2019-1 issuance from March, as well as other changes made to its reinsurance program this year, the firm’s nationwide aggregate protection now triggers at $3.54 billion of qualifying losses.