Allstate’s Sanders Re catastrophe bond completes and lists in Bermuda


U.S. primary insurer Allstate’s latest catastrophe bond deal, Sanders Re Ltd. (Series 2013-1), has now completed and the first risk period has begun. With Sanders Re 2013 Allstate has secured itself a new $350m layer of capital market backed fully-collateralized reinsurance protection for covered U.S. hurricanes and earthquakes, including fire following, on an industry loss and per-occurrence basis over a four-year risk period.

As with most recent cat bond offerings, Sanders Re increased in size from the $250m deal it began as to reach $350m in cover for the insurer. The Class A tranche of notes increased from $100m to $200m in size while the Class B tranche remained at $150m. At the same time the pricing dropped, again like most other recent cat bonds, and settled with a Class A coupon of 3.5% and a Class B coupon of 4%, meaning that Allstate’s cover came in cheaper than expected.

The two tranches of Series 2013-1 cat bond notes and the Sanders Re Ltd. principal at risk variable rate note program have been admitted to listing on the Bermuda Stock Exchange, assisted by listing sponsors Capital G and BSX Services Limited.

Standard & Poor’s has assigned its ‘BB+(sf)’ rating to the $200m Series 2013-1 class A notes and its ‘BB(sf)’ rating to the $150m Series 2013-1 class B notes issued by Sanders Re Ltd.

Now that the deal has completed we know what percentage of losses the cat bond notes will cover between the attachment and exhaustion points, the deal was marketed with room to flex this percentage depending on how large the deal grew. S&P said that the class A notes cover 66.67% of losses between an initial attachment point of $3.25 billion and an initial exhaustion point of $3.55 billion, while the class B notes cover 30% of losses between an initial attachment point of $2.75 billion and an initial exhaustion point of $3.25 billion.

Allstate’s Sanders Re cat bond has been another successful issuance for the insurer and is its largest cat bond issuance to date. As insurers like Allstate put more risk into the capital markets, through cat bond deals and other collateralized reinsurance deals, it enables them to build relationships with capital market investors which is important for the markets future.

Sanders Re uses an interesting trigger design, featuring line of business industry loss coverage including automobile, something not seen in a cat bond before. It’s encouraging to see this type of innovation coming from one of the U.S.’s largest primary insurers.

You can read all about Sanders Re in our catastrophe bond Deal Directory.

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