US primary insurer Allstate has returned to the catastrophe bond market with its typical May sponsorship of a cat bond to provide it with multi-peril Florida collateralized reinsurance protection, initially targeting a $200 million or greater Sanders Re III Ltd. (Series 2026-2) issuance, Artemis understands.
In recent years Allstate has tended to sponsor two or three catastrophe bonds, one of which is typically focused on sourcing capital markets backed reinsurance for its Florida primary insurance businesses and normally sponsored in May.
This new Florida-focused cat bond sponsorship takes the number of Sanders Re deals we’ve seen from Allstate to twenty-five, while it makes now twenty-seven cat bonds in total that we’ve tracked and analysed from the insurer.
Read about every cat bond sponsored by Allstate in our Deal Directory.
Allstate has a $300 million Class A tranche of notes from its Sanders Re III 2023-2 Florida-focused cat bond that is scheduled to mature this June. So this new offering looks set to replace at last a portion of that reinsurance coverage.
For its latest cat bond, Allstate is utilising its Sanders Re III Ltd. issuance vehicle, which it last used for part of the nationwide cat bond issuance in March this year, we understand.
Sanders Re III Ltd. is offering two tranches of Series 2026-2 notes, which will be sold to capital market cat bond investors and the proceeds used to collateralize reinsurance agreements between the issuer and Allstate’s Florida underwriting entities.
As with previous Florida-focused cat bonds from Allstate, we understand the beneficiaries of the coverage will be the firms’ Florida-focused underwriting subsidiaries Castle Key Insurance, Castle Key Indemnity, as well as the National General and Northlight brand entities.
We understand the new Sanders Re III 2026-2 catastrophe bond is designed to provide those insurance subsidiaries with both a three and a four year source of fully-collateralized reinsurance, on a cascading indemnity and per-occurrence trigger basis.
One tranche of notes seeks three years of coverage, while a second seeks four years. With no other differences between the notes, it is possible Allstate opts to lock-in only one of the options, depending on investor response to the notes, we expect.
The target issuance size is currently $200 million, but if both tranches are placed we believe there is a chance to upsize the offering to as much as $400 million in size.
The covered perils, for both tranches of notes, will be the typical Florida named storm, earthquake, severe weather, wildfire, volcanic eruption, and meteorite impact that Allstate has always covered with its Florida focused cat bonds, sources said.
Sanders Re III is offering a Series 2026-2 Class A-1 tranche of notes that would have a three year term to the end of May 2029 and a Series 2026-2 Class A-2 tranche of notes with a four year term to the end of May 2030.
Both tranches have exactly the same risk metrics and attachments, each occupying a $200 million layer excess of $30 million, with an initial attachment probability of 1.40%, an initial base expected loss of 1.07% and having spread price guidance in a range from 4.5% to 5.25%.
Given the only difference between the Class A-1 and Class A-2 notes is their tenure or duration of coverage, it will be interesting to see how Allstate opts to place this coverage and which tranche of notes receives the strongest response from investors.
Given Allstate’s stature as a cat bond sponsor and current levels of investor appetite, it would not surprise to see both tranches placed and maximised for size.
Allstate is listed as the 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.
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.
