Allstate has now secured its targeted $200 million four year source of Florida catastrophe reinsurance protection with its latest catastrophe bond, pricing the notes from this Sanders Re III Ltd. (Series 2026-2) issuance below guidance, Artemis understands.
At first, this offering saw two tranches of notes on offer, one targeting three years of reinsurance, another four years, each with the same risk metrics.
We explained at the time that a tranche being dropped from the offering was possible, depending on investors response to the deal and the different durations of coverage, which we then reported had happened.
As we reported in our first update on this deal, the three year tranche of notes were dropped and would not be issued, with Allstate focusing solely on the tranche of four year notes and maintaining its $200 million target for the deal.
Now, we’ve learned that the four year tranche of notes have been successfully priced below the initial guidance that was offered, to secure Allstate the targeted four year sources of Florida multi-peril catastrophe reinsurance.
This new Florida-focused cat bond sponsorship takes the number of Sanders Re catastrophe bond deals we’ve seen from Allstate to twenty-five, while it makes twenty-seven cat bonds in total that we’ve tracked and analysed that have been sponsored by the insurer.
Read about every cat bond sponsored by Allstate in our Deal Directory.
With this transaction now priced and finalised, Sanders Re III Ltd. will issue a single $200 million tranche of Class A-2 Series 2026-2 notes, to provide Allstate with a four year source of fully-collateralized reinsurance, on a cascading indemnity and per-occurrence trigger basis.
The notes will provide the insurer with reinsurance protection against losses from the perils of Florida named storm, earthquake, severe weather, wildfire, volcanic eruption, and meteorite impact.
The $200 million of Series 2026-2 Class A-2 tranche of notes will provide Allstate with reinsurance across a four year term to the end of May 2030.
The Class A-2 notes come with an initial base expected loss of 1.07%. At first they were offered with spread price guidance in a range from 4.5% to 5.25%, which was later revised and updated to a new range of 4% to 4.5%, as Allstate targeted lower pricing for the reinsurance coverage the notes will provide.
Now, we’ve learned the $200 million of Series 2026-2 Class A-2 notes that Sanders Re III will now issue have been priced to pay investors an initial risk interest spread of 4%, so at the bottom of reduced guidance.
So Allstate successfully secured the longer duration reinsurance protection at attractive pricing for its latest Florida-focused catastrophe bond, bolstering its protection in the state.
The insurer has a $300 million Class A tranche of notes from its Sanders Re III 2023-2 Florida-focused cat bond scheduled to mature this June, which means with this new issuance only $200 million in size Allstate will have less cat bond coverage in Florida this year.
However, the four year duration of these new cat bond notes will benefit the insurer with longer-term cover.
However, having recently sponsored its largest ever single visit to the cat bond market in March, when it secured $1.2 billion of nationwide (ex-Florida) reinsurance from two Sanders cat bond issuances, Allstate still has much more cat bond protection available to it this year.
It’s important to note that, at its renewal of its nationwide reinsurance program for April 1st, Allstate added a $1 billion US aggregate excess catastrophe reinsurance arrangement that also covers losses in Florida, so that has extended the insurers aggregate protection in the state, perhaps meaning less cascading cat bond cover is now required.
Allstate is currently the second largest sponsor of outstanding catastrophe bonds at this time in our leaderboard chart, with $3.8 billion of cat bond reinsurance protection currently in-force.
That will increase to $4 billion when this new cat bond settles, but then drop back to $3.7 billion again when the 2023-2 notes mature just over a week later.
You can read all about this Sanders Re III Ltd. (Series 2026-2) from Allstate and every other catastrophe bond issuance in the extensive Artemis Deal Directory.
