Allstate held reinsurance coverage tight through renewals – at a cost

US property insurer  Allstate made it through the 2022 reinsurance renewals without apparently having given much ground on terms in the face of what market insiders have called a rugged and pricey renewals season.

Key retentions were flat and total coverages were up in select areas, including Florida, a presentation of the renewal program suggested.

“We benefit from a broad portfolio with geographic spread that provides an efficient one-stop shop for reinsurers to underwrite a large portion of US catastrophe exposure,” CFO Mario Rizzo told an investor call.  Allstate believes it benefits from status as a “large purchaser” with a of “outperformance” in protecting reinsurers when events happen.

Looking back,  Allstate paid $144 million for its reinsurance coverage in the second quarter of 2022, ahead of renewals, a 27% year on year increase. That followed a 31% annual cost increase for full-year 2021.

In the nationwide per occurrence excess catastrophe program,  Allstate kept its own retentions at a mere $500 million while increasing its maximum coverage to $6.6 billion, chiefly on new single-year term contracts and a recent Sanders Re cat bond. Lower layers are taken by multi-year deals, one third of which is placed each year.

Aggregate programs provide $600 million of coverage above $4.4 billion, a steady sum at a fractionally higher attachment point versus the prior year program.

Separate Florida coverage may have been increased palpably, the presentation indicated. The top excess layer runs to $1.83 billion, up nearly 50% from the prior cap. All three layers include new 2022 Sanders Re cat bond placements.

“While the risk-adjusted cost of our Florida program did increase, we were able to fully place our program given our strong relationships with the reinsurance market and our operating capabilities,” Rizzo told the call.

That run up in coverage comes even as  Allstate speaks to very limited appetite for primary homeowners’ coverage in the troubled state following what officials call “inadequate” reforms of that market.

"We are cautious about Florida,"  Allstate's chief of personal property-liability Glenn Shapiro told investors.  “This is not a market we are looking to aggressively grow in right now given the lack of effective reforms there and the challenge with pricing in that market.”

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