US primary insurer Allstate has reported that its pre-tax catastrophe losses for the third-quarter of 2024 reached $1.7 billion, with $630 million of that total due to hurricane Helene.
Readers might be aware that Allstate’s catastrophe bonds that provide it with annual aggregate reinsurance protection see their risk period beginning as of April 1st.
So, the pre-tax catastrophe loss total for the first-half of that annual aggregate catastrophe bond risk period now stands at $3.8 billion.
It’s important to note that it is not possible to estimate how much of the retention sitting beneath the aggregate Sanders Re catastrophe bonds that Allstate has in-force will have been eroded by the loss total so far.
There are a number of reasons for this, including the fact the aggregate cat bonds feature a $50 million event deductible, so smaller events don’t qualify under their terms. Also the fact some of the losses from hurricane Helene will be from Florida and property losses from that state are excluded from Allstate’s aggregate cat bond coverage, as the company has a separate reinsurance tower for the Florida business.
However, as we had reported previously, Allstate’s annual aggregate catastrophe losses that are applicable under the terms of its Sanders Re catastrophe bond program had reached $1.3 billion after July 2024.
Which meant that, as of the end of July, only roughly 50% of Allstate’s pre-tax catastrophe losses at that time had qualified under the terms of the aggregate cat bonds.
With Helene a large event for the insurer, at $630 million, pre-tax, it seems unlikely a further 50% of the third-quarter losses will prove applicable to the aggregate Sanders Re deals. Which might suggest, that somewhere under half the $3.8 billion pre-tax catastrophe loss run-rate through Q2 and Q3 2024 might erode the aggregate retention related to the catastrophe bonds.
In total, Allstate reported estimated catastrophe losses for September of $889 million pre-tax, or $702 million after-tax, including $630 million, pre-tax, related to Hurricane Helene.
The insurer said that its total catastrophe losses for the third quarter were $1.70 billion pre-tax, or $1.35 billion after-tax, and that its total catastrophe losses for the calendar year to the end of September reached $4.55 billion pre-tax, or $3.60 billion after-tax.
While the hurricane Helene loss is a significant event for the company, the fact Helene’s impacts were so widespread across multiple US states may mean the burden in a specific state such as Florida, where Allstate entity Castle Key has its own reinsurance tower, is not overly meaningful.
That said, when Allstate renewed its Florida reinsurance tower at the renewals in 2024, the company revealed a risky catastrophe bond layer sitting very low-down, the Sanders Re II Ltd. (Series 2024-2) issuance.
That was a privately placed issuance and so no pricing data is available for it at this time, so we are uncertain whether there have been any effects from hurricane Helene, or potentially October’s hurricane Milton.
Once Milton losses are reported, it may become clearer. With Milton’s losses set to be Florida only, it seems that event won’t have any implications for the aggregate Sanders Re catastrophe bonds though, as that will be an event for Allstate’s Florida reinsurance tower, we imagine.
