Allstate sponsors $74.5m zero-coupon Sanders Re II catastrophe bond – Artemis.bm


US primary insurance giant Allstate has returned to the catastrophe bond market and secured $74.5 million in additional multi-peril reinsurance protection through a new Sanders Re II Ltd. (Series 2024-2) cat bond issuance that has been relatively privately placed as zero-coupon notes, Artemis has learned.

It’s Allstate’s second catastrophe bond sponsorship of the year, after the company secured $400 million of multi-peril reinsurance from a Sanders Re III Ltd. (Series 2024-1) issued in January.

Details are scarce, as we’ve only learned about this latest catastrophe bond from Allstate after it has been issued and settled, with this new cat bond said to have been less broadly marketed and offered to a relatively small group of cat bond fund investors, we are told.

Allstate has not used the Sanders Re II Ltd. special purpose insurer (SPI) for a cat bond since November 2021, according to Artemis’ data on cat bond deals sponsored by the company.

So, it is interesting to see the insurer resurrecting that Bermuda based issuer, when its last six cat bonds have been issued by Sanders Re III Ltd., which is also Bermuda based.

In this case, we’re told by sources that Sanders Re II Ltd. has issued a $74.5 million tranche of Series 2024-2 Class A notes that have been sold to investors and the proceeds used to collateralize the underlying reinsurance agreement with Allstate.

At this stage we are not 100% certain what perils are covered under this latest catastrophe bond from Allstate, although it seems likely to provide reinsurance for multiple peril types for the insurer, as is typical with the Sanders Re cat bonds.

Allstate has not sponsored a single peril cat bond since 2008, but the insurer does issue US wide (ex-Florida) multi-peril cat bonds and then Florida focused multi-peril cat bonds throughout the year, so it seems safe to assume it will be one of those two types of arrangements.

In fact, given the time of year, we make the assumption this will be a new Florida multi-peril deal, as Allstate’s cat bond issuances in May have always tended to be of this kind and its main US nationwide reinsurance gets renewed for April 1, while its Florida reinsurance tower renewal is at June 1.

In terms of how the coverage is structured, it is safe to assume these are indemnity triggered cat bond notes, given every transaction from Allstate uses an indemnity trigger.

Also, we would expect them to provide per-occurrence protection, given Allstate’s aggregate cat bonds have tended to come to market earlier in the year, before its main April reinsurance renewal and its Florida cat bond coverage has always been per-occurrence in nature.

The $74.5 million of Series 2024-2 Class A principal-at-risk notes issued by Sanders Re II Ltd. are structured as zero-coupon notes, which Allstate has often opted for where the notes come with a higher risk level, or provide a shorter coverage term.

In this case, the $74.5 million of notes cover Allstate against losses for a one-year term, with maturity slated for June 9th 2025, we understand.

Unfortunately we do not have any of the risk or pricing metrics for this new Sanders Re issuance from Allstate, but we have added it to our Deal Directory and will update that entry as any further information becomes available.

We have made the assumption that Allstate has used its typical service providers to sponsor this cat bond, in terms of structuring agents, bookrunners and risk modelling, which you can see in the Deal Directory entry.

You can read all about this Sanders Re II Ltd. (Series 2024-2) from Allstate and every other catastrophe bond issuance in the extensive Artemis Deal Directory.

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