Mario Rizzo, Executive Vice President (EVP) and Chief Financial Officer of The Allstate Corporation, has said that the insurer feels “really good” about its larger catastrophe reinsurance program for 2019 – 2020.
Allstate makes extensive use of reinsurance protection to optimise the risk and return profile of its homeowners business, and recently announced a larger catastrophe program when compared with the previous year.
The expanded program provides coverage of up to $4.86 billion after a $500 million retention on a per-event cover, and the firm once again utilised the capital markets for third-party capital-backed reinsurance protection in the form of a catastrophe bond transaction via its Sanders Re issuance platform, while previous cat bond issuance remain in-force.
The firm’s cat bonds provide it with both excess of loss cover and also serves as an aggregate, with Allstate now having roughly $800 million of aggregate protection in excess of $3.54 billion.
Speaking during the company’s Q1 2019 earnings call, EVP & CFO Rizzo, discussing Allstate’s latest reinsurance placement, said that it did see “some modest pressure on pricing.”
Adding, “I think a lot of that was driven by reinsurers kind of reevaluating their wildfire exposure in their models. But it was not a material move from a pricing standpoint, so we feel really good about the placement this year.”
Rizzo continued to explain that Allstate effectively renews a third of its program every year, which further protects it from any real year-to-year changes in reinsurance pricing.
“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,” he said.
Looking forward and to the placement of the firm’s Florida portion of coverage Rizzo highlighted industry noise around upward development on some of the hurricane losses.
“Our recoveries over the last couple of years have been a bit more modest, I think, than others. So, we will see what the ultimate pricing is, but I wouldn’t expect a meaningful variation relative to what we saw in the national program,” he said.