Allstate’s Q3 cat losses up to $814m, Calgary hail event leads to $225m reinsurance recovery

Large US primary insurer Allstate has reported estimated catastrophe losses of $306 million for the month of August, with $75 million, or approximately 25% related to a hail event in Calgary, Canada.

Allstate has revealed that the Calgary hail estimate includes reinsurance reinstatement premiums and is net of anticipated reinsurance recoveries of $225 million.

At the January 2024 renewals, Allstate purchased Canadian catastrophe reinsurance protection, which provides the firm with total coverage of CA$355 million excess a CA$75 million retention.

The $306 million cat loss total for the month is from 15 events, but after favorable reserve reestimates for prior period events, reduces to $272 million or $215 million, after-tax.

For July and August combined, Allstate’s total catastrophe losses are estimated at $814 million or $643 million, after-tax. For August year-to-date, the primary insurer’s total catastrophe losses stand at $3.67 billion, or $2.9 billion, after-tax.

As we wrote last month when the insurer disclosed its July cat loss estimate, annual aggregate losses under the terms of the carrier’s Sanders Re catastrophe bond program reached $1.3 billion after July 2024.

Allstate’s aggregate cat bond risk-period began on April 1st, 2024, and as at the end of July catastrophe losses for the period stood at $2.64 billion. With the addition of the August total, this has now risen to $2.91 billion.

The outstanding cat bonds provide the insurer with $650 million of coverage, and sit between an attachment of $3.56 billion and an exhaustion point of $4.41 billion after the latest annual reset.

It’s unclear exactly how much of the August catastrophe losses are applicable under the terms of the cat bond program, but given that losses for the month are relatively low, some $335 million down on last year’s August, it’s safe to say that applicable aggregated losses are still someway off the $3.56 billion attachment point.

A big difference for Allstate in recent years, in terms of catastrophe losses qualifying and subsequently eroding the aggregate deductible under the terms of its reinsurance program, is the $50 million event deductible clause in the aggregate Sanders Re catastrophe bonds.

This event deductible means that for any cat loss to qualify under the terms of the aggregate cat bonds, it must cause the insurer at least a $50 million loss, meaning that smaller events fail to erode the deductible underneath the cat bonds.

For example, in July, Allstate reported pre-tax catastrophe losses of $542 million, but just $200 million of this is applicable losses under the terms of the Sanders Re cat bond program. In June, losses amounted to $230 million, yet none of these losses were applicable and therefore the run-rate for cat losses that qualify under the terms of the aggregate cat bonds remained unchanged from May.