Convective storms & hail drive Allstate’s cat losses above expectation again

U.S. primary insurer Allstate has again reported monthly catastrophe losses that were higher than analyst expectations, reporting $311 million of impacts during the month which took its second-quarter cat losses to $1.07 billion before tax.

That means Allstate’s catastrophe losses for the first-half of 2019 are estimated at somewhere just shy of the $1.7 billion mark, before tax, having reported $680 million of cat losses for the first-quarter earlier this year.

Allstate said that it will account for estimated catastrophe losses of $309 million, pre-tax ($244 million, after-tax) for the month of June 2019, which were caused by 16 individual loss events at an estimated cost of $311 million, pre-tax ($246 million, after-tax).

The difference of $2 million is due to favourable re-estimates of prior period catastrophe losses.

Convective weather again seems to be the cause of Allstate’s catastrophe losses coming out higher than had been anticipated, as the insurer, like much of the insurance and reinsurance sector, had exposure to some of the severe weather and hail events that struck the United States during the month.

Allstate said that Texas and surrounding area storm and hail events accounted for 60% of its catastrophe losses in June, with four specific loss events contributing the majority of this.

Outbreaks of severe convective weather have become a major driver of losses above expectations in insurance and reinsurance, regularly cited as the reason for earnings misses and greater than expected costs.

Allstate had cited hail storms in Texas as also being a driver of its catastrophe losses in the first-quarter of this year.

Allstate had previously reported $763 million, pre-tax ($603 million, after-tax), in estimated catastrophe losses for the months of April and May 2019.

Added to June this brings the insurers second quarter 2019 catastrophe losses to $1.07 billion, pre-tax ($847 million, after-tax) and the first-half total is nearing $1.7 billion before tax.

All of this remains well below Allstate’s reinsurance tower and Sanders Re catastrophe bond.

Allstate’s Sanders Re Ltd. (Series 2018-1) catastrophe bond provides annual aggregate reinsurance protection across a risk period that only began in April. So far, Q2 losses appear aligned with modelled expectations for this layer of the insurers reinsurance tower.

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

The insurers per-occurrence catastrophe cover attaches only for much larger events than this, so it’s still a long way to go before Allstate’s reinsurance and cat bond protection would be deemed at any risk from these aggregating catastrophe loss events.