Allstate’s YTD cat losses rise to $2.5bn on October severe weather

Year-to-date 2019 pre-tax catastrophe losses for U.S. primary insurance giant Allstate have risen to $2.5 billion, after 12 events in October added another $237 million to the running total.

Allstate has reported that its estimated catastrophe losses for the month of October 2019 reached $237 million before tax ($187 million, after-tax).

The October losses that hit Allstate were spread out across 12 separarate catastrophe and severe weather events.

The insurer said that almost 60% of its estimated catastrophe losses for the month were driven by one severe weather event that primarily impacted Texas.

We assume that this Texas severe weather event will be the Dallas are tornadoes and severe hailstorm that struck the state on October 20th.

That storm outbreak is estimated to have caused a financial impact to the insurance and reinsurance industry of over $2 billion, so it’s no surprise Allstate took its share, or that it was the insurers largest loss of the month.

The October total takes Allstate’s reported catastrophe losses to $2.5 billion pre-tax for the first ten months of 2019.

Allstate had suffered $680 million of pre-tax catastrophe losses in the first-quarter of this year, followed by another $1.072 billion in the second-quarter and then $510 million in the third-quarter.

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

Allstate has itself now cited convective weather and hail as the main catastrophe loss driver in a number of months so far this year.

Allstate’s 2019 catastrophe losses are running ahead of 2018’s, when it had reported just under $2.1 billion of pre-tax losses for the first ten months of the year.

Despite the rising catastrophe loss tally in 2019, Allstate’s losses are still well below where reinsurance capital providers need to begin 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.

Since the beginning of April (when the current risk period began) the catastrophe loss tally has reached almost $1.82 billion. So far, these losses are aligned with modelled expectations for this layer of the insurers’ reinsurance tower and there is no threat to the cat bond.

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