May hail drives Allstate’s pre-tax Q2 catastrophe losses to $757m

US primary insurance carrier Allstate has reported $213 million of estimated pre-tax catastrophe losses for the month of May 2021, which takes the insurers second-quarter total to $757 million before tax.

Severe weather and hail storms are the key drivers of May’s catastrophe toll, with two large hail events responsible for roughly 60% of Allstate’s May catastrophe losses.

May was a much less severe month for Allstate, in terms of catastrophe losses, than April, when the insurer had reported $544 million of net catastrophe losses for that month.

Allstate has been experiencing elevated catastrophe losses through most of 2021 to-date, largely due to the winter storms and Texas freeze event, but then also large hail has become the main driver through April and May.

The first quarter catastrophe losses caused Allstate to make some reinsurance recoveries under its Sanders Re catastrophe bonds, with those losses then increasing after further March losses eroded the cat bond backed aggregate reinsurance cover even more.

However, Allstate’s annual risk period for its aggregate reinsurance from the Sanders Re cat bonds, resets at the end of March. Which means the April and May tallies begin the erosion of the deductible sitting beneath that layer of reinsurance protection again.

Allstate said today that May’s $213 million of pre-tax catastrophe losses are reduced to $168 million, after-tax.

As a result, the $757 million of pre-tax catastrophe losses for April and May, are also reduced to $598 million, after-tax.

In May 2021, Allstate said that it experienced seven catastrophe loss events in total, which drove $193 million of the pre-tax figure, while the rest of the $213 million came from loss creep reserve re-estimates for prior period events.

Two large hail events, largely affecting the state of Texas, accounted for approximately 60% of Allstate’s May estimated catastrophe losses.

It’s worth pointing out again that the prior period reserve additions reported by Allstate after May could affect the loss picture for its Sanders Re cat bonds, if they come from events prior to the end of March and that have qualified under the terms of the loss-affected cat bonds.

Any loss creep on those events booked by Allstate does have the potential to raise the ultimate loss related to the catastrophe bond backed reinsurance.