Allstate’s Q2 catastrophe losses rise to almost $1.2bn

Aggregate catastrophe losses suffered by U.S. primary insurance giant Allstate have risen to almost $1.2 billion for the second-quarter of 2020, with the pace of severe weather losses falling slightly in June.

By the end of May, Allstate had already suffered $982 million, pre-tax ($776 million, after-tax) of catastrophe losses, largely from severe or convective weather, tornado and hail events.

That was a heavy toll for the start of the aggregate reinsurance contract year for a number of Allstate’s catastrophe bonds.

The annual risk period for some of Allstate’s aggregate catastrophe bonds begins from April 1st, so the insurer has reinsurance protection that losses through the second-quarter of the year aggregate towards the attachment points of.

But for June, Allstate has reported a lower level of catastrophe losses, at $204 million, pre-tax ($161 million, after-tax), $181 million, pre-tax ($143 million, after-tax) of which is from ten catastrophe events during the month, plus unfavorable prior period reserve re-estimates.

Roughly half of Allstate’s June catastrophe losses came from three severe wind and hail weather events, that primarily impacted Texas, Pennsylvania and Alberta (Canada), the insurer said.

The annual aggregation of losses under the reinsurance protection Allstate benefits from through its Sanders Re catastrophe bonds begins at the start of Q2, however the insurers’ retention for these cat bond layers of its reinsurance tower are high though.

For Allstate to be able to claim on any of the reinsurance provided by its aggregate Sanders Re catastrophe bonds its losses during the annual risk period would have to aggregate above $3.576 billion, which is where the trigger of its 2019-1 Sanders Re cat bond can attach.

Meaning there’s a long way to go for any of Allstate’s cat bonds to be threatened by catastrophe losses in this annual risk period, although the total of $1.19 billion, pre-tax ($937 million, after-tax) from just one quarter of the year is now a third of the way through the retained layer.

But, important to note that the convective storm season peak is generally in Q2, so losses from that peril would on average lessen from now. But the hurricane season and other perils including wildfires could easily ramp up the total, if any significant catastrophes occur.

Allstate recently added around $221 million of new protection to its core nationwide excess of loss catastrophe reinsurance program, with the capital markets playing an important role through its most recent Sanders Re II catastrophe bond issuance.