Allstate seeks $225m+ multi-peril catastrophe bond Sanders Re 2023-1
US primary insurance carrier Allstate is targeting at least $225 million of catastrophe reinsurance from its first catastrophe bond issuance of this year, with the Sanders Re III Ltd. (Series 2023-1) deal set to provide multi-layer coverage across a proposed three tranches of notes.
Allstate has sponsored 16 successful cat bond issuances since it entered the market in 2007 and the Sanders Re programme is an annual feature of the market these days, with the insurer having sponsored three issues last year.
Details of every cat bond from Allstate can be found in our Deal Directory.
Of course, Allstate has also benefited from significant reinsurance support through its cat bond programme, with a number of recoveries made over the years.
So it’s encouraging to see the carrier continue and as we explained the other day, thanks to its cat bonds Allstate’s reinsurance tower now extends to its highest level ever, reflecting the strong support the insurer has from the ILS market.
Having only sponsored a single tranche cat bond back in December 2022, Allstate is now returning to its more established practice of a multi-trance issuance, with one as yet unsized and a far riskier layer of notes in a zero-coupon format and providing one-year of cover.
Allstate’s Bermuda based special purpose insurer (SPI) Sanders Re III Ltd. is targeting the issuance of three tranches of Series 2023-1 cat bond notes, we’re told.
The notes will provide Allstate with a source of US nationwide, except Florida, coverage against losses from US named storms, earthquakes, severe weather events, wildfires, volcanic eruptions and meteorite impacts, all on an indemnity trigger basis.
Losses from Allstates personal lines property and auto insurance businesses, including from affiliates, are covered, we’re told.
A $100 million tranche of Class A notes will provide four-years of per-occurrence cover above an attachment of $4.75 billion of losses, giving them an initial attachment probability of 1.02%, base expected loss of 0.9382%, and as a result these are offered with price guidance of 5.75% to 6.5%, we understand.
A $125 million tranche of Class B notes will provide four years of annual aggregate reinsurance across a $500 million layer attaching at $3.598 billion of losses, we understand, giving them an initial attachment probability of 1.02%, base expected loss of 0.7402%, and as a result these are offered with price guidance of 15% to 15.75%.
The final Class C tranche are a one-year, zero-coupon set of notes, that would provide occurrence cover across a $250 million layer attaching at $750 million of losses. These are far riskier, having an initial attachment probability of 28.13% and expected loss of 18.63%. There is no price guidance at this stage, we’re told, but if successful this would be one of (if not) the riskiest layers of cat bond notes ever sponsored by Allstate and the price would be expected to be high as a result.
With that final tranche, it seems Allstate is testing out the cat bond markets appetite for a much lower-layer of risk, likely given the challenging reinsurance market environment it is likely to face in renewing lower-layer coverage.
So it will be interesting to see how this cat bond is received overall, as the multiples look a bit lower than Allstate’s December cat bond, while that zero-coupon tranche will provide a good test of investor appetite for riskier tranches.
You can read all about this Sanders Re III Ltd. (Series 2023-1) from Allstate and every other catastrophe bond issuance in the extensive Artemis Deal Directory.