Allstate’s annual aggregate catastrophe losses near $2.5bn pre-tax

Artemis has tracked the annual aggregate catastrophe losses disclosed by US primary insurance giant Allstate and with the risk period for its aggregate reinsurance and catastrophe bond arrangements running since April 1st last year, appears to have racked up close to $2.5 billion of pre-tax losses by the end of February 2023.

Allstate has just disclosed estimated catastrophe losses for the month of February of $211 million or $167 million, after-tax.

Catastrophe losses for February events were estimated at $241 million, driven by nine individual events largely associated with wind and rain  and that were geographically widespread.

Part of this had been offset by some favorable reserve reestimates for prior events, the insurer said, but updating on the calendar year-to-date, Allstate said its catastrophe losses for January and February 2023 totalled $518 million, pre-tax.

Allstate had previously announced that it aggregated roughly $1.1 billion of catastrophe losses through the second-quarter of 2022, so the first quarter of the annual risk-period for its aggregate reinsurance and cat bond covers.

The company then disclosed $763 million of cat losses for the third-quarter of the year thanks largely to hurricane Ian. But with Ian covered under a different Florida specific reinsurance tower, we need to subtract that event, which left around $100 million perhaps from Q3 2022.

Allstate then announced $779 million of pre-tax Q4 catastrophe losses, with winter storm Elliott the main driver.

So, with a further $518 million of catastrophe losses from the first two months of Q1 2023, which is the fourth and final quarter of the risk period for Allstate’s reinsurance and cat bonds, the total has now almost reached $2.5 billion, pre-tax, with one month still to report before the end of the term that could increase the aggregation.

It’s notable that Allstate’s aggregate nationwide catastrophe reinsurance arrangements are all provided via a range of its Sanders Re catastrophe bond issues, with coverage attaching at just over $2.7 billion of losses.

Which suggests the insurer may not be that far away and were March’s catastrophe losses to prove significant, it could mean Allstate nears a level of aggregate losses that its lowest down aggregate Sanders cat bonds could be considered at-risk, with the potential for their maturity to be extended, or even for some erosion of principal to be seen.

It’s important to note, that we are just reporting pre-tax catastrophe losses and quite how losses aggregate under the specific terms of the catastrophe bond is likely to be a little different, while franchise or per-event deductibles could also lower, or raise the total.

So, all we can say at this stage is that the aggregate pre-tax reported catastrophe losses Allstate has disclosed, suggest the cat bonds may be viewed as a slightly at-risk, although it does seem March would need to see a larger than expected cat loss burden reported for them to be really troubled.