U.S. primary insurance giant Allstate has now priced, according to sources, and will provide the company with a $250 million source of both per-occurrence and annual aggregate multi-peril reinsurance protection across a four-year term.
The Sanders Re II Ltd. (Series 2020-1) transaction hit its $250 million target for Allstate, delivering the insurer the capital markets backed reinsurance protection it had sought from the outset with its latest catastrophe bond deal.
This is now the eleventh catastrophe bond sponsored by Allstate that we have listed in our extensive catastrophe bond Deal Directory, and this deal is the second to be issued under the Sanders Re II special purpose insurer.
The successful pricing of its latest cat bond means Allstate will benefit from a four-year source of U.S. multi-peril catastrophe reinsurance protection, covering certain losses from U.S. (excluding Florida) named storms, earthquakes, severe weather events, fires, and losses from other perils, on a fully collateralised basis.
The reinsurance protection provides Allstate with cover for losses within its personal lines property and auto books of business, on an indemnity trigger basis and offering both per-occurrence and aggregate reinsurance protection.
Allstate did not seek to upsize on its latest catastrophe bond, settling for the $250 million of reinsurance target it launched seeking.
A $150 million Class A tranche of Series 2020-1 notes will provide per-occurrence reinsurance protection only and attach at $2.75 billion of losses with an initial base expected loss of almost 0.95%.
The Class A notes were at first offered to cat bond investors with price guidance in a range from 4.25% to 4.75%, but eventually priced at the mid-point of guidance of 4.5%.
A $100 million Class B tranche of notes that offers both per-occurrence and annual aggregate reinsurance protection, will attach at $2.75 billion of losses to Allstate on an occurrence basis and $3.976 billion on an aggregate basis, with an expected loss at the base case of 0.92% on a combined basis.
The Class B notes launched with price guidance in a range from 12% to 13%, which then tightened towards the upper-end at 12.75% to 13% and we’re now told finally priced at 12.75%, so in the upper-half of guidance, but the lower-end of the revised range.
Now completed and ready for launch, Allstate will benefit from an expanded source of capital markets backed catastrophe reinsurance protection through 2020 and beyond, thanks to this successful catastrophe bond issuance.