The Allstate Corporation has expanded its catastrophe reinsurance program for 2019 – 2020 to $4.863 billion, compared with a $4.5 billion program in the previous year.
Overall, Allstate’s total catastrophe reinsurance spend in the first-quarter of 2019 was $88 million, compared with a total spend of $85 million in the prior year quarter.
For the full-year 2018, Allstate’s catastrophe reinsurance protection cost a total of $354 million, which is line with the $355 million reported for the full-year 2017.
Effective June 1, 2019 to May 31, 2020, Allstate’s catastrophe reinsurance program is made up of six components, including: Nationwide Excess Catastrophe Reinsurance Program; New Jersey Excess Catastrophe Reinsurance Agreement; Kentucky Earthquake Excess Catastrophe Reinsurance Contract; Excess & Surplus Earthquake Contract; Florida Excess Catastrophe Reinsurance Agreement; and a Florida and Southeast Auto Aggregate Excess Catastrophe Contract.
The increase in catastrophe reinsurance limit acquired by Allstate relates to the firm’s Nationwide Program, which features a larger one-year gap fill layer contract at a size of $219 million, and also a new, $200 million one-year wrap fill layer contract effective April 1st, 2019 and which was placed in the traditional market.
This year’s Nationwide Program also includes the firm’s latest insurance-linked securities (ILS) transaction, the $300 million Sanders Re II Ltd. (Series 2019-1) catastrophe bond. While this transaction doesn’t appear to have had any impact on the overall limit of the per-occurrence tower of the Nationwide Program, it has helped the firm lower its retention under the annual aggregate component and also push up the limit.
The annual aggregate segment now has a limit of $4.44 billion compared with $4.25 billion a year earlier, while the retention has declined from $3.75 billion to $3.54 billion.
So, Allstate has secured more than $360 million of additional catastrophe reinsurance protection when compared with last year, and also lowered its annual aggregate retention with the help of the capital markets, while total spend in Q1 jumped $3 million, year-on-year.
The firm recently announced catastrophe losses of $680 million for the first-quarter of 2019, up substantially on the $361 million recorded a year earlier. This, combined with lower income from performance-based investments, contributed to a decline in adjusted net income to $776 million, compared with $1.1 billion a year earlier.
“Allstate’s strategy to profitably grow market share in protection products continues to gain momentum. Using an innovative approach to better serve customers enabled us to grow while maintaining attractive returns,” said Tom Wilson, Chair, President, and Chief Executive Officer (CEO) of Allstate.
