Reinsurance News

Allstate lifts Florida reinsurance coverage by ~$600m at renewals

17th June 2022 - Author: Luke Gallin

After adding some $850 million of coverage to its Nationwide Excess Catastrophe Reinsurance program in the first-quarter of 2022, US primary insurer Allstate has secured almost $600 million of additional protection for its Florida Excess Catastrophe Reinsurance program for 2022-2023.

In early May, Allstate provided an update on its reinsurance arrangements for the months ahead, including the notable expansion of its per-occurrence Nationwide tower to provide coverage up to $6.614 billion of losses excess a $500 million retention.

After a late June renewals, the carrier has now completed the placement of its 2022-2023 Florida reinsurance tower, which provides coverage for Castle Key Insurance Company, Castle Key Indemnity Company and affiliated companies personal lines property excess catastrophe losses in the state.

The program runs from June 1st, 2022 to May 31st, 2023, and includes five traditional reinsurance market contracts, reimbursement contracts with the Florida Hurricane Catastrophe Fund (FHCF), and two Sanders Re catastrophe bonds placed in the insurance-linked securities (ILS) market.

At this year’s renewal, Allstate secured traditional reinsurance market coverage of $1.3 billion for its Florida program. The first to attach is a $126.9 million below FHCF layer excess a $40 million retention, which is 71.1% placed and has two reinstatements of limits. Sitting next to this is the riskier Class C tranche of Sanders Re III notes, which provide $37.5 million of limit excess a minimum $169.6 retention.

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Above this sits first, second, and third excess layers which provide combined coverage of $1.14 billion excess a $169.6 million retention. Broken down, the first layer provides $367.5 million of limit; the second provides $417.7 million of limit excess a $169.6 million retention and wraps around both the 2022-2 Class B Sanders Re III notes, and the 2020-2 Sanders Re II cat bond; the third excess layer provides $350 million of limit excess a $169.6 million retention and wraps around the 2022-2 Class A notes of the Sanders Re III cat bond.

As well as the three main excess layers and two ILS market transactions, this year’s program also includes a multi-year excess layer which provides $264.1 million of coverage excess a $169.6 million retention. This slice of protection sites alongside the 2022-2 Class B excess cat reinsurance contract, and also a new gap fill layer that provides $50 million of protection excess a $169.6 million retention.

allstate-2022-florida-renewal

As the image shows, above a $40 million retention, Allstate’s 2022-2023 Florida Excess Catastrophe Reinsurance tower provides coverage up to $1.831 billion, and is comprised of traditional placements totalling $1.3 billion, and two catastrophe bond transactions totalling $487.5 million.

In comparison, the 2021-2022 Florida reinsurance program also had a $40 million retention under the below FHCF layer, with coverage extending up to a total $1.239 billion, comprised of traditional reinsurance protection of $939.1 million, and $200 million of coverage via the 2020-2 Sanders Re II cat bond.

Also this year, mandatory FHCF coverage is larger than in 2021, in-line with the growth of the tower and Allstate has continued to opt for 90% participation.

So, Allstate’s Florida reinsurance tower has grown by almost $600 million, year-on-year, with almost 50% of the growth coming from its $287.5 million Sanders Re III 2022-2 catastrophe bond transaction, which is split across three layers of the program. The remaining roughly $300 million of growth is from the traditional reinsurance market.

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