While Allstate increased the amount of limit in its reinsurance program during the first few months of 2019, pricing pressure was felt but it was not material, according to Allstate’s CFO.
Allstate revealed a growing reinsurance program recently, having added to its total limit protection so far in 2019.
Allstate’s reinsurance towers now provide for $4.863 billion Nationwide excess catastrophe reinsurance limit, up from $4.5 billion in the second half of 2018.
At the same time it has also increased its aggregate catastrophe reinsurance protection as well, to around $800 million excess of $3.54 billion, thanks to its latest $300 million Sanders Re II 2019-1 issuance from March.
Adding all of this new protection did add to Allstate’s reinsurance costs, of course, but it appears to have been in-line with the expected pricing, as the firm’s CFO Mario Rizzo said price moves were not material.
Allstate did experience higher pricing overall though, Rizzo said.
He explained, “I think, from a pricing standpoint, we did see some modest pressure on pricing.”
“A lot of that was driven by reinsurers kind of re-evaluating wildfire exposure in their models,” he continued. Adding, “But it was not a material move from a pricing standpoint.”
Despite the clear firming of property catastrophe reinsurance rates in 2019, it seems large ceding companies, like Allstate, are not being surprised (or disappointed) by the extent of reinsurer and ILS return expectations this year.
“We feel really good about the placement this year,” Rizzo said.
The use of multi-year reinsurance coverage and the catastrophe bond market has helped Allstate to lessen the impact of any increase in rates as well.
“We effectively renew a third of our program every year, which further insulates us from any real fluctuations and reinsurance pricing year-to-year,” Rizzo said. “We feel good about the execution and we use both the traditional reinsurance market and the ILS market to optimize the execution of our placements.”
And looking forwards to the renewals at the mid-year, when Allstate’s Florida program will also see some fresh limit purchased, Rizzo commented, “Our recoveries over the last couple of years have been a bit more modest, I think, than others. So, we’ll see what the ultimate pricing is. But I wouldn’t expect a meaningful variation, relative to what we saw in the national program.”
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