Allstate : Q1 2025 Reinsurance Update

Published: 2025-04-30 17:33:32 ET ALL

Published on 04/30/2025 at 17:33

Northbrook, IL, April 30, 2025 - We have placed coverage related to our 2025-2026 Nationwide Excess Catastrophe Reinsurance Program (1) that provides reinsurance protection to the Allstate Protection businesses of The Allstate Corporation (NYSE: ALL), the Kentucky Earthquake Excess Catastrophe Reinsurance Contract, and the Canada Catastrophe Reinsurance Contract. The Florida Excess Catastrophe Reinsurance Program and the National General Lender Services Standalone Program will be placed in the second quarter of 2025. We continue to evaluate complimentary coverage that provides aggregate protection and reduces earnings volatility.

The catastrophe reinsurance program is part of our catastrophe management strategy, which is intended to provide our shareholders with an acceptable return on the risks assumed in our property business, reduce earnings variability, and provide protection to our customers. Our current catastrophe reinsurance program supports our risk and return framework which incorporates our robust economic capital model and is informed by catastrophe risk models including hurricanes, earthquakes and wildfires. As of March 31, 2025, the modeled 1-in-100 annual aggregate probable maximum loss for hurricane, earthquake and wildfire perils is approximately $3.1 billion, net of reinsurance. We continually review our aggregate risk appetite and the cost and availability of reinsurance to optimize the risk and return profile of this exposure.

Allstate's catastrophe reinsurance program materially reduces our exposure to wind, earthquake, and wildfire losses. We employ a multi-year approach to placing reinsurance coverage to lessen the amount of reinsurance being placed in the market in any one year. Claim adjustment fees are indemnified as a percentage of ultimate net loss and are included within each contract's reinsurance limit.

The reinsurance agreements have been placed in the traditional reinsurance and Insurance-Linked Securities ("ILS") markets. In doing so, we consider a number of factors including coverage, cost, terms, and the period of protection. All reinsurers participating on our program have an A.M. Best or S&P insurance financial strength rating of A- or better. Additionally, all reinsurance agreements placed in the ILS markets are collateralized.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, was $257 million and

$286 million in the first quarter of 2025 and 2024, respectively. The total cost of our catastrophe reinsurance program during 2024 was $1.11 billion.

The following pages summarize our reinsurance program which includes:

Nationwide Excess Catastrophe Reinsurance Program

Florida Excess Catastrophe Reinsurance Program

National General Lender Services Standalone Program

Kentucky Earthquake Excess Catastrophe Reinsurance Contract

Excess & Surplus Earthquake Contract

Canada Catastrophe Excess of Loss Reinsurance Contract

(1) A reinsurance program comprises one or more reinsurance agreements and a reinsurance agreement comprises one or more reinsurance contracts

2025-2026 Nationwide Excess Catastrophe Reinsurance Program

The Nationwide Excess Catastrophe Reinsurance Program (the "Nationwide Program") provides per occurrence coverage for events up to $9.50 billion of loss less a $1.00 billion retention and is subject to the percentage of reinsurance placed in each of its agreements. It also provides aggregate coverage up to $500 million for catastrophe loss events in excess of a deductible of $50 million per event with $66 million of limit utilized by expected recoveries. The agreements comprising the Nationwide Program are described below.

The Nationwide Program includes occurrence coverage in contracts from both the traditional reinsurance and ILS markets, while annual aggregate protection is included in contracts supported by the ILS market. The agreements provide multi-line catastrophe coverage in every state except Florida, where coverage is only provided for personal lines automobile.

Core Traditional Reinsurance Market Multi-Year and Per Occurrence Excess Agreements

Reinsure personal lines property and automobile losses arising out of multiple perils including, but not limited to, hurricane, windstorm, hail, tornado, earthquake, fires following earthquakes and wildfires in all states, excluding personal lines property in the state of Florida

Include coverage for commercial lines property and automobile (physical damage only) in all states, excluding commercial lines property in the state of Florida

Contracts provide combined placed limit of $3.25 billion, with one reinstatement of limits per year, with premium required

New multi-year contracts with $1.13 billion of placed limits effective June 1, 2025 and expire May 31, 2028

New single-year contracts with $66 million of placed limits effective June 1, 2025 and expire May 31, 2026

Existing multi-year contracts with $1.03 billion of placed limits effective June 1, 2024 and expire May 31, 2027

Existing multi-year contracts with $1.03 billion of placed limits effective June 1, 2023 and expire May 31, 2026

Reinsurance premiums are subject to adjustment for exposure changes on an annual basis

Contain comparable contract terms and conditions as contracts providing coverage for events up to $4.25 billion

Contracts provide a combined $336 million of placed limits

One contract provides $105 million of placed limit, with one reinstatement of limits in a given contract year, with premium required, effective April 1, 2021 and expire March 31, 2029

One contract provides $131 million of placed limit, with one reinstatement of limits in a given contract year, with premium required, effective April 1, 2021 and expire March 31, 2029

One contract provides $100 million of placed limit, with no reinstatement of limits, effective April 1, 2025 and expire March 31, 2028

Reinsurance premiums are subject to adjustment for exposure changes on an annual basis

Contain comparable contract terms and conditions as contracts providing coverage for events up to $4.25 billion

Contracts provide a combined $2.28 billion of placed limit in excess of a $4.25 billion retention

One contract provides $600 million of placed limit, with one reinstatement of limits, effective June 1, 2025 and expire March 31, 2026

One contract provides $950 million of placed limit, with one reinstatement of limits. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $5.25 billion, effective April 1, 2025 and expire March 31, 2026

One contract provides $494 million of placed limit, with no reinstatement of limits. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $6.25 billion, effective April 1, 2025 and expire March 31, 2026

One contract provides $242 million of placed limit, with no reinstatement of limits. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $8.35 billion, effective April 1, 2025 and expire March 31, 2026

Contracts provide additional gap coverage as the layer shifts down in attachment, subject to the $4.25 billion minimum retention level as lower layer limits are exhausted

Retention co-participation of 5% is deemed in place and inures to the benefit of the contracts

Sanders Re Catastrophe Bonds Agreements

The Sanders Re Per Occurrence Excess Catastrophe Reinsurance Contracts

Reinsure excess catastrophe losses caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events declared to be a catastrophe by Allstate

Reinsure personal lines property and automobile excess catastrophe losses in 49 states and the District of Columbia, excluding the state of Florida

Reinsure business located in the covered territory and arising out of covered events

Contain a variable reset option, which the ceding entities may invoke for risk periods subsequent to the first risk period and which allows for the annual adjustment of the contract's attachment and exhaustion levels within specified limits

Contracts do not include a reinstatement of limits

Contain comparable contract terms and conditions as the Sanders Re Per Occurrence Excess Catastrophe Reinsurance Contracts

For each annual period beginning April 1, Allstate declared catastrophes occurring during such annual period can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limit

Reinsurance recoveries from the Nationwide Per Occurrence Excess Contract inure to the benefit of the annual aggregate layer

Reinsurance recoveries collected under the per occurrence limit of each contract are not eligible for cession under the annual aggregate limit of that contract

Reinsurance recoveries for all loss occurrences and annual aggregate losses qualifying for coverage during each contract's four-year risk period are limited to our ultimate net loss from covered events and subject to the contract's limit

Placed with Sanders Re II Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began April 1, 2025, and terminates on March 31, 2028 for two tranches:

Risk period began April 1, 2025, and terminates on March 31, 2030 for two tranches:

Placed with Sanders Re II Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began April 1, 2025, and terminates on March 31, 2029

Consists of two tranches

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began April 1, 2024, and terminates on March 31, 2028

Provides a $400 million per occurrence limit in excess of a minimum $4.25 billion retention. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $6.51 billion

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began April 1, 2023, and terminates on March 31, 2027

Consists of two tranches

$50 million event deductible

Provides an annual aggregate limit of $150 million between a $4.50 billion to $5.00 billion layer subject to an annual retention of $4.50 billion

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began December 8, 2022, and terminates on March 31, 2027

Provides a $100 million per occurrence limit in excess of a minimum $4.25 billion retention. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $8.68 billion

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Risk period began April 1, 2022, and terminates on March 31, 2026

Consists of three tranches

For a qualifying loss occurrence, the contract provides $175 million in reinsurance limits in excess of a minimum $4.25 billion retention. While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $8.95 billion

Provides an annual aggregate limit of $175 million between a $4.50 billion to $5.00 billion layer subject to an annual retention of $4.30 billion

$50 million event deductible

Provides an annual aggregate limit of $175 million between a $4.00 billion to $4.50 billion layer subject to an annual retention of $4.00 billion. $66M of aggregate limit has been utilized by expected recoveries

Florida Excess Catastrophe Reinsurance Program (will be placed in the second quarter of 2025 and will be effective June 1, 2025).

The 2024-2025 Florida Excess Catastrophe Reinsurance Program provides coverage for Castle Key Insurance Company ("CKIC"), Castle Key Indemnity Company ("CKI") and affiliated companies personal lines property excess catastrophe losses in Florida. For the June 1, 2024 to May 31, 2025 term, the Program includes two contracts placed in the traditional market, Castle Key's reimbursement contracts with the Florida Hurricane Catastrophe Fund (the "Mandatory FHCF - Florida Hurricane Catastrophe Fund Contracts")(2) and three Sanders Re contracts placed in the ILS market.

Mandatory FHCF Contracts

Indemnify qualifying personal lines property losses caused by storms the National Hurricane Center declares to be hurricanes

Mandatory FHCF contracts provide combined $205.6 million of limits in excess of a $104.3 million retention and are 90% placed. For each of the two largest hurricanes, the retention is $104.3 million and a retention equal to one-third of that amount, or approximately $35 million, is applicable to all other hurricanes for the season beginning June 1, 2024

Include reimbursement of up to 10% of eligible loss adjustment expenses, which is part of and not in addition to the reinsurance limit provided, with no reinstatement of limits

Reinsurance limit and retention are subject to re-measurement based on June 30, 2024 exposure data; retention is also subject to adjustment upward or downward to an actual retention based on exposures submitted to the FHCF by all participants

(1) CKIC's, CKI's and Century National Insurance Company's (CNIC) mandatory FHCF coverage is provided under reimbursement contracts distinct to each entity. CKIC's FHCF reimbursement contract provides a $53.2 million limit after a $27.0 million retention, 90% placed. CKI's reimbursement contract provides a $152.2 million limit after a $77.2 million retention, 90% placed. CNIC's reimbursement contract provides a $0.2 million limit after a $0.1 million retention, 90% placed.

Sanders Re Catastrophe Bonds Agreements

The Sanders Re 2024-2, 2023-2 and 2022-2 Excess Catastrophe Reinsurance Contracts

Reinsure qualifying losses to personal lines property caused by a named storm event, a severe weather event, an earthquake event, a fire event, a volcanic eruption event, or a meteorite impact event in Florida as defined in the contract

For the June 1, 2024 to May 31, 2025 risk period, stated reinsurance is defined to include the Below FHCF Contract, the Mandatory FHCF Contracts which are deemed to exhaust due to loss occurrences subject to the non-FHCF contracts, and the Excess Agreement; stated reinsurance is deemed to be provided on a multiple perils basis under the terms of the non-FHCF contracts and includes an erosion feature, which provides that upon the exhaustion of a portion of the stated reinsurance, coverage under the Sanders Re Contract shall be concurrently placed above and contiguous to the unexhausted portion of the stated reinsurance, if any

Contain a variable reset option, which Castle Key may invoke for risk periods subsequent to the first risk period and which allows for the annual adjustment of the contract's attachment and exhaustion levels; the variable reset option requires a premium adjustment

Contracts do not include a reinstatement of limits

Placed with Sanders Re II Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Single-year term contract with a risk period effective June 1, 2024, through May 31, 2025

Consists of one tranche: Class A provides $74.5 million of placed limit in excess of a minimum $30 million retention

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Three-year term contract with a risk period effective June 1, 2023, through May 31, 2026

Consists of one tranche: Class A provides $300 million of placed limit in excess of a minimum $104.5 million retention

Placed with Sanders Re III Ltd. which obtained funding from the ILS market to collateralize the contract's limit

Three-year term contract with a risk period effective June 1, 2022, through May 31, 2025

Consists of two tranches

Traditional Reinsurance Market Contract

Single-year term contract with a risk period effective June 1, 2024, through May 31, 2025

Reinsures personal lines property excess catastrophe losses caused by multiple perils in Florida

Placed in the traditional reinsurance market providing combined $309.5 million in placed limit in the following layers

Reinsurance premium is subject to adjustment for exposure changes

Other Catastrophe Reinsurance Programs

The following programs are designed separately from the Nationwide and Florida Excess Catastrophe Reinsurance Programs to address distinct exposures in certain states and markets.

National General Lender Services Standalone Program

Reinsures the National General lender services portfolio, which includes property, automobile and real estate owned products

Consists of one single-year term contract expiring May 31, 2025

Provides one limit of $70 million in excess of a $70 million retention and one limit of $195 million in excess of a $140 million retention

Inuring contracts include the National General FHCF Contract providing $71.3 million of limits in excess of a $36.2 million retention, 90% placed

Includes one reinstatement of limits, with additional premium due

Kentucky Earthquake Excess Catastrophe Reinsurance Contract

Reinsures personal lines property losses in Kentucky caused by earthquakes and fire following earthquakes

Consist of one annual term contract expiring May 31, 2026

Provides $28 million of placed limit in excess of a $2 million retention, with one reinstatement of limits

Reinsurance premium and retention are not subject to adjustment for exposure changes

Excess & Surplus ("E&S") Earthquake Contract

Reinsures personal lines property catastrophe losses in California caused by the peril of earthquakes and is insured by our excess and surplus lines insurer; reinsures only shake damage resulting from the earthquake peril

Contract extended through June 30, 2025

Provides reinsurance on a 100% quota share basis with no retention

Allows for cession of policies providing earthquake coverage as long as the total amount of in-force building limits provided by those policies does not exceed $400 million; $400 million cap limits the policies that are covered by the reinsurance contract and not the amount of loss eligible for cession, which includes losses to dwellings, other structures, personal property and additional living expenses on policies covered by this program

Canada Catastrophe Excess of Loss Reinsurance Contract

Reinsures personal lines property and automobile physical damage catastrophe losses in the Canadian provinces of Ontario, Quebec, Alberta, New Brunswick and Nova Scotia

Consists of one annual contract expiring December 31, 2025

Contracts provide a combined CAD 478 million of placed limit in excess of a CAD 100 million retention, structured as five separate layers

CAD 50 million limit in excess of a CAD 100 million retention, 75% placed

CAD 100 million limit in excess of a CAD 150 million retention, 90% placed

CAD 200 million limit in excess of a CAD 250 million retention

CAD 100 million limit in excess of a CAD 450 million retention

CAD 50 million limit in excess of a 550 million retention

Includes one reinstatement of limits, with additional premium due

Disclaimer

The Allstate Corporation published this content on April 30, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2025 at 21:31 UTC.