Catastrophe bond losses continue to affect investors in the $300 million Sanders Re II 2019-1 cat bond transaction sponsored by US primary insurance giant Allstate, as loss creep from US winter storm Uri and Texas freeze continued to erode the notes remaining principal in the second-quarter.
As we explained earlier this year, Allstate’s aggregate losses soared on the impacts of winter storm Uri and the related freezing weather in Texas, resulting in reinsurance recoveries from across its tower.
Some of those reinsurance recoveries came from the Sanders Re II 2019-1 catastrophe bond, which was triggered after Allstate’s aggregate catastrophe losses breached its trigger, attaching that layer of reinsurance coverage.
When we reported on this cat bond in April, it looked like Allstate was set to recover roughly $184 million from its nationwide aggregate reinsurance tower, with the Sanders Re II 2019-1 cat bond the likely source of these recoveries.
It then became clear in May that Allstate’s reinsurance recoveries from the catastrophe bond were a little higher, when we reported they had reached $195 million as of the end of Q1 2021, leaving $105 million of coverage still to run.
Some of these prior period catastrophe loss reserves seem to have affected the Sanders Re catastrophe bond as well, with further reinsurance recoveries being made as erosion of its principal continued.
Now, after the second-quarter, erosion of the $300 million catastrophe bond has now reached $253 million, with just $47 million of principal remaining to cover any continuation of the loss creep and development Allstate has been experiencing.
Allstate confirmed that the additional erosion of the catastrophe bond layer of reinsurance protection occurred due to Q1 events, suggesting the creep is likely to have come from the winter storms in the United States.